Then, RCH had to build the digital infrastructure to permit electronic transfers between plans, said Williams.
“That infrastructure is really in the hands of record keepers,” he said, particularly big platforms like Alight, Vanguard and Fidelity. “We’re in the process of creating a hub-and-spoke network between record keepers, so each of them can connect into our hub and thereby enable electronic transfers of people’s plans.”
Thus far, RCH has onboarded Alight onto its solution, but is at work with other record keepers, said Williams.
And while RCH’s technology is indifferent to account size, thus far regulators have only signed off on moving small accounts on an opt-out basis.
Williams said that plan portability may keep many younger investors out of IRAs until they reach a more advanced age, but it also offers them more options as to what happens to their retirement plan balances, and in the long run, could be a boon to the IRA industry.
“There’s a lot of chatter about retirement plans being a great place to be, but I’m not sure that’s always the case. It’s a huge and diverse market,” he said. “If we can keep people invested in the system and incubate their accounts—and not cash out—by the time they get to the age where they’re really planning for retirement, they’ve kept most of their retirement savings in one place, and they’ve become an excellent potential client for an advisor.”
Retirement plans have already evolved over the past two decades to include auto-enrollment, auto-escalation of paycheck deferrals, and the target-date fund as the qualified default investment alternative of choice, noted Williams.
“Auto-portability is the next logical step,” he said.