The 401k / retirement industry has been slow with new technology adoption. Plans can be expensive to administer. The industry continues to be under fee pressure needing to find ways to reduce cost. Many people do not have access to 401(k) plans who work for small companies. Most firms are dependent on older legacy technology that has served them well in the past. This software is too tightly coupled to take advantage of new technology. Most of the recent work that has been done on the front end of the systems (web sites, mobile devices, etc.), but not addressed the fundamental inflexibility of older technology. Because of the expensive technology, the industry has not full adopted all that could be done to lower operating expenses of retirement plans. The expense has made it difficult to sell and service plans in the small market.
There is a way to move forward. A system architecture can be built using modern technology. The core of the system is a ledger which keeps track of all the accounts and assets. The use of modern components that can be Interchangeable parts that provide functions around the plan, such as plan administration should be employed. The core account ledger can be a newly developed system, potentially a blockchain account providing participant security and portability, or still use existing ledger systems. With well-defined Restful API’s, components can be assembled to provide a product to provide flexible service for 401(k) providers. A core component can contain plan rules which would be kept separately from the ledger but accessible with well-defined API’s. Other components can be used to create the proper experience and product that a 401(k) provider wants to offer. The connectors could allow easy integration to other industry software tools. The ledger and components can be housed securely in the cloud for optimal operations as software as a service.
Over the next couple of months, I will be creating a series of white papers on retirement plan technology. Based on my experience, I will give some thoughts that may be provocative. The point is to raise the awareness in the industry. I will have some partners joining me on authoring some of the papers. Along with the documents, I will be creating more detailed design for each component looking for partners to help bring this vision to fruition.
Based on my experience and seeing where things are at today, I am creating this series of documents for industry awareness. Following are the topics to be examined in more detail with more white papers. I encourage feedback on these ideas.
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