Keeping client data safe has become a prime concern of financial advisors and companies in the retirement industry, according to a report by Cerulli Associates.
The sentiment may not be surprising given that retirement specialists are storehouses of personal information about their clients, with data ranging from individual Social Security numbers to health records to personal relationships, a report released by the firm today said.
“In a digital age, these firms essentially double as technology companies, with plan sponsors and their consultants/advisors closely scrutinizing security procedures and policies,” said Anastasia Krymkowski, an associate director at Cerulli. “It is critical for providers to maintain accurate data representing participants’ transactions while safeguarding their assets and confidential information.”
Cybersecurity was cited as a top issue by 80% retirement specialist advisors in a recent Cerulli survey, with respondents adding that it is the single most important factor when evaluating recordkeepers.
The security of client data is a growing issue partly because the retirement industry is expanding services, and thus collecting more information about clients, the report said.
Cerulli found that 90% of retirement industry recordkeepers, and a majority fo advisors and consultants, offer financial wellness programs that address topics ranging from budgeting and debt management to investing, college planning, Social Security optimization and retirement income.
"In addition to safeguarding sensitive data such as Social Security numbers, firms with personalized financial wellness programs must securely maintain data ranging from individuals’ credit card debt and outstanding student loans to their career satisfaction, work productivity, personal relationships, smoking status, and even sleep patterns," Cerulli said in a press release.
The firm added that providers administering such programs need to ensure their technologies allow for data security that complies with the Health Insurance Portability and Accountability Act (HIPAA), a federal law adopted in 1996 that sets national standards for the security of personal health information.
"Responsive design and mobile apps, aggregating account information, and streamlining the navigation process through single sign-on are several areas where innovation continues to occur," Cerulli said.
As part of the report, Cerulli surveyed 401(k) plan sponsors and found that their top priority for 2020 was improving financial well-being programs for employees, followed by maximizing participants' savings, maintaining a competitive retirement benefit and reducing plan administration and investment costs.
"Mindful that employees may have conflicting commitments—from paying down debt and budgeting for healthcare to saving for future education expenses—plan sponsors are striving to help participants navigate their workplace benefits and save for retirement while addressing other financial concerns," the report said.
Other findings in the report include:
• Retirement market assets saw a five-year compound annual growth rate of about 3.9% from 2013 to 2018. The 2018 fiscal crisis led to a 4.2% decrease, or about $1 trillion, in total U.S.retirement market assets.
• With a little less than $9 trillion in assets, individual retirement accounts represented the largest segment of the U.S. retirement market at the end of 2018 with $9 trillion in assets. That was followed by corporate defined-contribution plans and public defined-benefit plans.
• State and local government defined-benefit plans had a $1.1 trillion funding gap at the end of 2018.
• Larger plan sponsors are more likely to incorprate environmental, social and governance (ESG) investments into their 401(k) plans. In a survey, 56% of large sponsors rate ESG factors as “very important,” compared to only 32% of small plan sponsors.