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What would Steve Jobs do if he ran the 401(k) business?

The Apple visionary would get customers to buy the latest product, simplify share classes and create a seamless retirement-plan ecosystem

Aug 9, 2017 @ 11:54 am

By Aaron Pottichen

Steve Jobs was a master at getting people to buy into the Apple ecosystem. It's why so many of us have purchased not just an iPhone, but an iPad and a Mac computer, too, and have done so multiple times (in my case, at least).

Steve Jobs got people to vote with their wallets by continuously rolling out new products and features, having those products work easily together and making things simple.

How would the Apple visionary have applied those principles to improve the retirement plan market?

Get your customers to buy the latest product

One of the issues with retirement plans is the lack of annual change among employers. This is partly due to the way the retirement plan system works. A company hires a financial adviser and record keeper, and off they go. There is no requirement for the employer to move to a new record-keeping system or add certain features. Plan sponsors can keep the same setup for years and years, and are okay as long as they meet their fiduciary duty.

I believe Steve Jobs would unveil new product features for a record-keeping system on an annual basis. As part of this unveiling of new features, I believe he would also phase out older systems, thereby forcing companies to adopt the new features or the platform entirely.

The strategy would be tremendously beneficial to retirement plan advisers. It would give advisers a jumping-off point to start a discussion with plan sponsors around moving them to the new record-keeping platform, switching from their current platform (if it wasn't with Steve Jobs' company) or adding features they know would have a positive impact on employees.

Advisers would have a prime opportunity to engage with plan sponsors and have a serious discussion with a sense of urgency. This would be especially important for the plan sponsors whose platforms would eventually be phased out.

Create a seamless ecosystem for the retirement plan

When Steve Jobs first introduced the iPhone, he highlighted the fact that it uses the same operating system running on users' desktop computers. This was a really important benefit — it allowed the iPhone to run many of the same programs running on a Mac.

The retirement plan world can be frustrating for plan sponsors, though, in this regard. Often there is poor integration between the record keeper, payroll provider, onboarding tool and open-enrollment tool. This disconnect creates extra work, and the opportunity for human error.

I imagine Steve Jobs might construct an ecosystem in which all of this would be done seamlessly for the plan administrator.

There's a benefit here for retirement plan advisers: If a plan sponsor spends less time focusing on fixing connectivity issues between their products, they can focus more on items that will help employees become more prepared for retirement.

Simplify the share-class system

One of the beautiful things about the iPhone is the simplicity of its design. It has one button, not a full keyboard.

When it comes to the retirement-plan world, the sheer number of share classes available for the same investment fund can spin the head of even the most seasoned pro. The misuse of the wrong share class is also the basis of many 401(k) lawsuits.

I imagine Steve Jobs would eliminate all share classes and move his funds to one share class for each investment fund, likely the lowest-cost share class available. This would result in a simplified process for all parties involved, reduce operating costs for the investment firms, and likely cut down on lawsuits related to misuse of share classes.

Retirement plan advisers would be able to focus more on plan design and education. They wouldn't need to focus on share-class issues that arise as plans gain more assets.

Aaron Pottichen is the retirement services president at CLS Partners, an Austin, Texas-based financial advisory firm.

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