The Future of Pensions Technology

06 Nov 2024

Pension Transfers Improvements

First seen on Money Marketing

Imagine we’re living in the not-too-distant future. We no longer talk about the issues surrounding pension transfers as we’ve solved that problem.

Occasionally we look back and wonder why it took us so long. The technology was already there, we just hadn’t got round to using it properly. Maybe we spent too much time considering who should foot the bill. Now we’re all seeing the benefits, we tend not to dwell on the past for too long. An old article pops up and reminds us about how long transfers used to take. We’re pleased it’s not a hot topic anymore. Perhaps the drive for better customer outcomes under the Consumer Duty prompted us all to act.

Or did the regulator have to take a stronger stance on transfers and the industry was left with little choice?

Either way, pension transfers now happen almost instantly. It makes for a much better experience for clients and advisers. The financial services industry has made its dream of straight-through processing a reality. Transactions are so much faster as they no longer require manual intervention.

Firms have learned to cooperate. They’ve stopped fixating on the prospect of assets leaving their platform. There’s a level playing field where it’s easy to transfer in or out at the click of a button. There’s far better integration too. Everything happens so much smoother, freeing up time for more important things.

Technology driving change in pensions

Technology is a big driver of change. Over the years our lives have transformed as new tech has changed the way we do things. From how we keep our homes and go about our work to how we manage our finances, the way we travel and even how we interact with health professionals.

Now let’s picture ourselves even further into the future. We’ve witnessed the AI revolution. The explosion of generative AI – popularised through the likes of ChatGPT – accelerated the change. Once everyone was aware of it, more and more people started working on it and spending money on it.

Such investment meant issues like hallucinations have been overcome. Adoption of AI in a regulated environment felt more challenging to begin with but the industry has engaged with the regulator and we’ve found a way for humans and tech to work together to provide better service standards. In the past we assumed art, music, creativity and natural language interaction were uniquely human. Machines were used to process stuff but we didn’t think they could have some kind of qualitative discussion with us.

Then AI started to make a good impression of someone having a conversation. It was just the beginning. Change happened rapidly. It took a lot of the mundane tasks away from us and then we started to think a bit more about how we could use it to our advantage. We saw the rise of the bionic adviser – those who embraced adopting AI within their business.

It allowed them to lower costs while at the same time provide a higher quality of service to more clients than before. We’ve started to make real progress in reducing the advice gap. Soft skills took centre stage once more and manual inputting fell by the wayside.

Now advisers can truly focus on building relationships with their clients, while AI helps with other areas such as reports and risk profiling. People seek advisers because they trust them. Technology is no longer a differentiator. Tools are used as just that, something to make the job more efficient.

Clients are more bionic now too. They arrive at review meetings more informed about the difficult decisions they might have to make. If advisers don’t mention something, clients now question whether they should be thinking about it.

Hyperpersonalisation

For ages we talked about the importance of personalisation. In this future world we live in, it’s all about hyperpersonalisation.

Advisers are better equipped to understand the risk profile of clients. AI applications talk to clients and provide some benchmark numbers compared to a large number of people it has talked to. It hasn’t just asked 10 questions as part of a questionnaire. It’s had a proper conversation to get an understanding of an individual’s personality and attitude towards financial risk. It understands their circumstances.

The adviser has sat in on this meeting and has learned more about the client too before setting the tool to work to convert the answers into an algorithmic, numerical model which a human wouldn’t be able to achieve with such accuracy.

Risk planning tools and illustrations are hyperpersonalised and show what your future could look like. The adviser sense checks with familiar stochastic modelling and all in a fraction of the time it otherwise would have taken to get such detail. Open banking has opened up further and we now have an open wealth framework giving a holistic view of all of our finances. Blockchain has played a part in enabling the end client to own their data. Inefficiencies and obstacles with the technology have been dealt with.

Clients now get to decide who can access their data rather than the other way around. Financial services companies can be just that as opposed to people holding the assets and data. People are saving more towards their retirement. Save the change tools have been updated so money can immediately be directed to a pension fund.

Open and connected systems have enabled savers to get better advice and optimise their savings and pensions. The potential was there all along, we just needed to release it.

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