Jazzing up retirement administration systems

01 November 2016 Grant Field, FedGroup

Due to the long term nature of retirement investing, the industry is not synonymous with innovation when it comes to administration systems.

At the inception of a group pension fund or individual retirement investment, basic administrative requirements such as monthly recurring contributions and annual escalations are established and are usually left to run their course until the fund reaches maturity.

Accordingly, the incentive to update legacy systems that are still able to execute such basic tasks has been low. These legacy systems, many of which were built using closed standards, often lack the ability to integrate with other systems, either internally or externally, to that of the banks for example.

A competitive advantage

Much of the retirement industry's technological advancements can be found on back-end systems that manage fund allocation. However, front-end administration systems are, in general, woefully behind the times, which is a travesty for the industry and to the detriment of customers.

As such, an opportunity exists for newer entrants into the market to differentiate themselves and gain a competitive advantage through the development and implementation of end-to-end systems that offer all the modern information technology (IT) solutions on the front end, to deliver a customer-, industry- and internally-facing interface and the requisite capabilities that are on par with back-end systems.

Greater efficiencies

Implementing a modernised administration system enables a broker to easily access information in real time, for updates on investment performance that can inform future retirement planning.

A modern administration system also creates greater efficiencies which translates into better customer service, fund performance and, potentially, lower fees. Most notably in this regard is a modern system's ability to enrich and improve data, especially in group pension funds that rely heavily on employer info and feedback.

In terms of group fund administration, a system that integrates with payroll can verify information, including tax and bank info, and can automatically notify a provider if additional data is required. This ensures better compliance, and employers can be proactively managed to supply the requisite information to manage a fund on behalf of their employees.

This capability also ensures that the 'dirty data' most administration systems contain can be 'cleaned' up. This ensures reporting is accurate, with the ability to deliver useful and beautifully-presented info that is beneficial to fund managers and administrators, as well as brokers, employers and their employees, or individual investors.

Enhancing the advisory role

Modern administration systems also reduce the likelihood and impact of human error at the data capture stage. An open-standards system can seamlessly integrate with other systems to confirm and pull data from multiple sources once a basic profile with identity information has been set up. With this capability, the provider can deliver to the broker granular data analysis with in-depth insights to enhance their advisory role and ensure a comprehensive solution can be offered.

However, gaining access to these capabilities requires that providers choose the correct technology, which may not always be the 'safe choice'. As an example, when faced with this decision, chose to develop from the ground up a bespoke end-to-end system, instead of going for a box-drop solution from an established vendor.

Benefit from massive potential

Despite being a more expensive option in the short term, a custom system ensures a business will have what it needs and wants, with no excess 'fat'. It can also deliver everything that everyone in the value chain, particularly internal resources, need to run the business effectively and efficiently.

While many executives in the retirement industry understand that technology is an enabler and pay it lip service, few know exactly how it can benefit them despite the massive potential it holds. As such, there is huge scope for the adoption of better administration systems in the retirement industry, which will undoubtedly deliver benefits across the board, especially when paired with the right people and processes.

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