The market forces driving change in the retirement industry started before the Department of Labor (DOL) issued its final fiduciary rule and will continue, regardless of the effect of the rule by the new presidential administration, according to Broadridge research.
Broadridge identified three trends driving change in the retirement industry, including a shifting model of advice. Firms are shifting business models from commission-based fee structures to fee-for-service (or percentage of assets). Some of these trends were already under way, but they have been accelerated by the DOL Conflict of Interest Rule.
Broadridge also noted a trend toward passive investments and lower-cost funds. The general growth in exchange-traded funds (ETFs), combined with pressure on 12b-1 fees and the shifting of fund lineups and offerings, point toward retirement investors changing where they put their money. For instance, for the first three quarters of 2016, 80% of net new assets that flowed into funds went to passive versus active products.
In addition, the demands of consumers for integrated experiences across channels and devices are putting pressure on retirement providers to offer new ways to interact with participants. Expectations of how information is delivered and the ease of transactions from retailers such as Amazon and Apple are bleeding over into all industries. The ability to store and retrieve important financial information directly from the cloud is accelerating, pushing retirement communications to transform as well. Therefore, firms need to arm participants with communication tools that give them the power and flexibility to meet their needs “whenever and wherever” they want.
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