2 Main Retirement Challenges
There are two major reasons why it’s so difficult for the retirement services industry to modernize their technology: cost and risk.
The industry takes pride in its important work supporting generations as they move into retirement. And insiders are well aware that in order to continue to do so and remain competitive, they must maintain their status as both highly respected and financially sound institutions. I’ve found that providers are currently reassessing how to successfully balance these objectives as they look to drive positive outcomes to those they serve, as well as to the bottom line.
The infrastructure spend at most firms represents a significant corporate expense and in most cases is disproportionately applied to the modification or maintenance of legacy platforms in an effort to meet required compliance provisions. Capital investments are often prioritized to keep up with the competition over improvements related to efficiency, customer experience, or overall innovation.
Beyond the critical factor of cost, I’ve also observed that the prospect of changing retirement technology itself poses a far greater risk than it does to other industries. Negative experiences with major infrastructure changes in the past have set the expectation for substantial service disruptions with long term, painful repercussions.
So why not modernize? Untangling and rebuilding an infrastructure that was built over a 20-30 year period while managing billions in assets seems intimidating…but it doesn’t have to be.
Simplified by Today’s Technology
Past attempts to modernize legacy defined contribution technical infrastructure have achieved mixed success and were often accompanied by a degree of unplanned spend, and schedule and service disruptions. But with today’s advanced rules-based and service-oriented architectures, it may be not nearly as difficult to modernize your IT infrastructure as it has been in the past.
Yes, it’s hard work that requires total commitment from the top down, and there is of course some risk. But modernization today, if designed properly, should not be technically challenging work. The challenging part is developing your overall strategy and then organizing and managing the many activities and moving parts that are required for a successful business transformation.
The most important step in modernizing your infrastructure starts with defining your future-state vision, followed by creating the technical and transition strategies to achieve that vision, and finally implementing them.