As the tech world moves at lightning speed to leverage consumer data to provide efficiencies and better client experiences, the defined-contribution world is taking a Luddite stance, with no apparent solution in sight.
What are the impediments? What damage is being done? And how does the data dilemma make the $7.7 trillion DC market vulnerable to data-savvy tech companies like Amazon?
The need for better participant data is obvious, not only to customize investments beyond age-based target-date strategies to create a customized DB-like liability-driven investment, but also to make proper benefit allocations. Yet very little has been done to customize benefits and investments for participants.
Record keepers have some participant data but are limited by omnibus systems that make it possible to administer very small accounts with miniscule contributions, but difficult to drill down to individual data. Record keepers also have slim margins, which makes systemwide upgrades difficult, while cybersecurity concerns make sharing participant data even more problematic.
Yet broker-dealers, RIAs and individual advisers are asking for the data, each in a different file format, which is expensive for record keepers. They have spent tens of millions to accommodate changes requested by broker-dealers as a result of the now-defunct DOL fiduciary rule, which has stymied other investments.
One potential solution is the Depository Trust & Clearing Corp., an industry-owned entity that also runs the National Securities Clearing Corp., which revolutionized mutual fund trading. DTCC is working with the Society of Professional Asset-Managers and Record Keepers and with DC broker-dealers to create