Equipped for the future: The retirement industry’s new toolkit for growth

Bridging the pensions gap offers immense potential for innovation and growth within the retirement industry. Delivering doesn’t just demand scale and reach, but also a range of new tools and routes to market. How can your business ensure it has the capabilities to succeed?

With nearly two-thirds of workers worldwide (2.2 billion) not currently contributing to a pension scheme, there is an urgent need to rethink retirement solutions. As we explored in our recently published Retirement in America: Time to rethink and retool report, this rethink is both a commercial opportunity and a chance to assert the social purpose of the industry.?

In an earlier blog, I explored some of the resulting strategic imperatives. These include developing low cost and easily accessible retirement plans for small businesses and self-employed workers. To attract younger customers, it’s also important to create offerings that serve near-term requirements such as childcare costs as well as ultimate retirement goals.?

The big question is of course how to deliver. Among the considerations that regularly come up in my discussions with retirement industry leaders are “what new capabilities do we need” and “how can we fit them into our wider plans for operational modernisation?”. The industry’s response includes an acceleration in digitisation and automation to help reduce costs, strengthen client engagement and free up funds for investment. We’re also seeing a step up in consolidation as businesses look to bolster economies of scale and combat thinning margins in commoditised areas of the market.?

The next stage of transformation?

As important as scale and technology are, however, they may not be enough to succeed on their own. Client expectations are rising, distribution is evolving and boundaries between retirement and adjacent sectors are blurring. Emerging ecosystem models are also challenging traditional assumptions about how financial solutions should be developed and delivered.?

So, what’s the way forward? Drawing on both our work with clients and the research carried out for the Retirement in America: Time to rethink and retool report, three priorities stand out:?

1/ Pick your spot within the ecosystem?

Collaborative ecosystems allow your business to access cost-efficient and best-in-class capabilities in areas ranging from enrolment and servicing to digital assistants. They also open up opportunities to develop a more comprehensive offering in areas such as health, wellness and near-term financial planning. It’s important to consider what role you would play within this ecosystem. This could be superior customer insight and experience and providing a gateway to partner products and services and as well as specific in-house offerings. Having picked your spot, you can then make agile build, buy and borrow decisions to reinforce your strengths and position yourself within the marketplace.

2/ Reframe the client experience??

With price differentiation harder to achieve, client experience and the outcomes this helps to deliver are playing an ever-greater role in vendor selection. Clients are coming to expect the same digitally-enabled ease and intuition they’ve become accustomed to from other industries. In the retirement sector, this means customer service is no longer just measured on traditional factors such as average call time. Success now depends on delivering the right customer experience at the right time. And with clients at multiple life stages, one experience does not fit all.?

3/ Take digitisation to the next level?

Taking digitisation to the next level can help you to strike the right balance between reducing costs and building engaging experiences. It’s also a prerequisite for partnering with other providers. Examples include deploying digital platforms and mobile apps to open up additional service channels and enable you to offer a compelling mix of self-service, automated advice and human interaction, or developing cost efficient turnkey Pooled Employer Plans in the market at scale. In turn, the latest analytics and artificial intelligence would enable your business to provide proactive advice at various life stages, help clients develop a better understanding of competing financial priorities and build simple alert mechanisms into products to provide targeted financial education. While wholesale modernisation may be beyond the financial means of many smaller players, they can still invest in a common technology backbone that enables them to access and leverage larger ecosystems.

Set up to deliver?

Success in today’s retirement environment hinges on the ability to generate scale for distribution, innovate with new technologies and expand offerings to help address gaps in the market. You can’t compete on all fronts, so it’s more important than ever to pick your spot and focus investment where it can generate the greatest value for your clients.

? 2021 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure?for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with a professional advisor.