AI Slowly Makes Inroads into DC Plans
January 28, 2025 — Boston
DCIO managers gain efficiencies in back-office operations; asset management shows little adoption
The retirement industry is beginning to examine its relationship with artificial intelligence (AI) and how it can integrate new functionality in the coming years, according to the latest Cerulli Edge—U.S. Retirement Edition.
Cerulli finds that some forms of AI are already integrated into at least one area of defined contribution (DC) plan management and have the potential to ease back-office operations. According to Cerulli’s survey of defined contribution investment-only (DCIO) asset managers, 16% anticipate that AI's impact on legal document summaries will be 'significantly positive,' with 23% expecting it to be 'moderately positive' and another 23% expecting it to be 'slightly positive.'
“Focusing on more day-to-day functionality enhancements, asset managers and recordkeepers have much to gain from implementing AI tools into their back-office operations,” says Adam Barnett, senior analyst. “In the same realm as legal document summaries, beneficiary designations would greatly benefit from AI enhancement. Until recently, beneficiary forms were exclusively paper-based, meaning recordkeepers have decades worth of designations, many of which may have been superseded by newer submissions, marriages, divorces, etc.,” he adds.
At the same time, AI has yet to make inroads into other areas of DC plan management. According to Cerulli, 73% of target-date managers say AI will not be incorporated into asset allocation selection, glidepath personalization (at the participant or plan level), or glidepath design. Meanwhile, 67% say AI algorithms will not be used in risk management. DCIO asset managers confirm the findings of Cerulli’s target-date survey, with 59% of respondents indicating that AI will have no material impact on managing target-date products in the next year.
Looking forward, questions remain about AI's efficacy and how it might fit into the retirement industry. The DC business is hampered by inertia, with technology and tools that are often outdated and inflexible—one reason many providers are turning to third parties to manage their tech stacks.
“Establishing partnerships with such firms will be essential for recordkeepers looking to differentiate their financial wellness and engagement capabilities in the next five to 10 years. Partnering with third-party AI providers will enable recordkeepers to focus less on their technology and more on being retirement experts,” says Barnett. “Cerulli believes that AI could play an increased role in the retirement industry. Efforts undertaken now to explore efficiencies will ensure a smooth transition to AI-powered retirement tools of the future,” he concludes.
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Note to editors
These findings and more are from The Cerulli Edge—U.S. Retirement Edition, 4Q 2024 Issue.