I had the opportunity recently to attend the American Retirement Association’s Annual NAPA 401K Summit in San Diego. It is the annual gathering of advisors and service providers in the U.S. retirement industry and is a critical time for industry participants to learn, exhibit their capabilities, discuss issues and build relationships. It was a superb conference and a great opportunity to stay current in the sector.
Throughout the conference, two main themes were prevalent:
- America’s Small Business Coverage Gap: An important topic of discussion was the “Coverage Gap” in America whereby some 60 million workers, particularly in small businesses, don’t have access to a savings vehicle at work. This is magnified by the fact that Social Security in its current form is not viewed as sustainable. As discussed in our recent white paper entitled “Investing Along The Retirement Continuum”, this gap has been a particular focus of policymakers at both the state and federal level, which has led to legislation such as select states’ mandatory savings plan requirements and the Secure Act 2.0. On the national front, there was concern expressed that the government could eventually move toward disintermediating the private retirement system to address the coverage gap, similar to the Affordable Care Act 15 years ago.
- Opportunities for the Small Business and Small Plan Market: Central to the discussion was the size of the opportunity for financial advisors in the space, augmented by the fact that many advisors don’t focus on it. It reinforced the combination of both low access and low participation for small business employees in company sponsored savings plans, and how technology and recent policy have made it financially more attractive and easier for these businesses to establish plans. Other workshops centered on topics such as managed accounts as an alternative to Target Date Funds, or the utilization of guaranteed income products in 401Ks. Overall, there was a sense of optimism that the growth of the industry is accelerating.
Based on the dialogue, presentations, and numerous service providers exhibiting at the conference, change is afoot in the retirement space. Technology is making it easier and more affordable for companies to establish plans; new advisor dashboards have been developed that make it easier for advisors to service and advise retirement plan participants; and new investment products are regularly introduced to help participants achieve their goals; all of which is supported by policies that provide financial incentives for companies to form plans and automatically enroll workers.
As we move forward, it will be exciting to watch the innovation of all participants in the U.S. Retirement System as they address the growth opportunities ahead.
