With the advent of the pandemic, retirement recordkeeping is witnessing a major transition. As we know that retirement is one of the major opportunities for growth for asset managers. According to a survey, it has been found that the geriatric population residing in developed countries is going to share more during 2030 in comparison to the Chinese users aged between 15 to 59. A Plethora of financial institutions are gearing themselves up to tap into the various growth opportunities. In this blog, we will discuss the trajectories in this potential industry.
The United States has a colossal retirement market having assets amounting to USD 26 trillion in the form of private and public defined contributions. It has been found that this kind of account renders support to approximately USD 430 billion in revenue. Furthermore, the market is going to flourish more as studies found that by the year 2026, approximately three-quarters of the assets from the household will be owned by the population aged 55 years and above. It is quite evident that the Direct Contribution market is the primary keystone in the US retirement market:
Owing to the numerous growth opportunities in the domain the various top-notch record-keeping companies have increased the share of their assets from 51.1% in the year 2006 to 71.9% in the year 2018. The process was led by Fidelity Investment having an asset share of USD 2.51 trillion and renders services to 33,710 plans holding almost 25 million participants. The other one is Vanguard having USD 1.5 trillion in assets, 2600 plans, and around 5.1 million participants.
In order to expand their recordkeeping businesses, various providers are giving focus on fabricating new revenue streams and establishing management services. In fact, the market players in this business are willing to offer services like cradle-to-grave and take care of the lifecycle from the earlier investment to retirement. For example, a prominent company name OneDigital acquired another company called Resources Investment Advisors and made 13 deals. Another company name Empower Retirement, in the year 2020, completed the acquisition of the prominent digital wealth manager name Personal Capital and came into a deal to fabricate a unified financial wellness. The obvious intent in the above deals was to establish a platform to deliver financial wellness amalgamated with financial planning.
The financial institutions are willing to provide various services such as:
However, the majority of service providers rely on databases and the main challenges with these services are as follows:
These challenges are eradicated to some extent with the incorporation of technology. The following are some of the technological advancements introduced-
However, the providers are transforming the cost structure by using sponsors, advisors, and participants. There is an exponential rise in customer expectations and the market players are facing tremendous pressure. In order to garner benefits and long-term profitability various companies are trying to remain ahead of the competition. Some of the providers are breaking barriers and going through transformation:
The companies which are embarking on this transformational journey require organization new skills to go through the challenges. Market players are making investments in various new capabilities from automation to digital marketing. In this reference, the gap between the requirements can be filled in two ways:
Other than this, the primary requirement to compete in the coming Direct Contribution marketplace is either a scale-based competitive advantage or a specialized focus. The conquerors in the domain will be those who represent success by activating participant base holistic advice services. Rendering these services include efficacious wellness platform and financial planning.