Reshaping retirement planning: 4 pivotal elements in the 2024 financial landscape

A new report examines key issues driving “a profound transformation” of the financial landscape of the United States and how those issues are impacting retirement planning for both individuals and the organizations that employ them.

The authors of Marsh McLennan Agency’s 2024 Financial Trends Report, Innovations and challenges in finance: A look at generative AI, cybersecurity ad more, named four issues that employers should prioritize when managing retirement plan options in 2024:

• generative AI,
• fraud/cyber concerns,
• inflation and
• a convergence of retirement planning and wealth management.

The report tackled what these issues mean for managers of employer-sponsored retirement plans and explored how managers can strive to protect their organizations and employees.

“In this era of rapid change and complex financial challenges, the ability to adapt, innovate and seek professional guidance is paramount,” the report said. “Embracing the trends of generative AI, cybersecurity, comprehensive financial planning and combating the retirement savings gap are vital for securing a more stable and prosperous financial future.”

No. 1: Generative AI

The report’s authors called generative AI “a transformative force in finance” that is poised to disrupt a host of industries, including finance, and to help solve complex issues. For that reason, it makes it critical that organizations have a generative AI strategy.

“In personal finance, generative AI can personalize investment recommendations, analyze market data and propose new trading strategies by simulating different scenarios,” the report says. “This has the potential to make investing more accessible and personalized for individuals, democratizing access to financial advice and investment opportunities.”

Marsh McLennan Agency suggests that though generative AI can analyze “vast volumes of market data” and produce personalized investment recommendations, the most effective financial strategies “often emerge when technology is paired with human expertise.”

“Financial advisors bring a deep understanding of an individual’s unique financial goals and life circumstances, allowing them to tailor AI-generated recommendations to the client’s specific needs,” according to the report. “They provide a crucial layer of human oversight, ensuring that AI-driven decisions align with a client’s long-term objectives and risk tolerance.”

No. 2: Fraud/cyber concerns

Although artificial intelligence offers a wealth of possible benefits, it also brings new risks related to fraud and cyber threats. AI can be employed by those “seeking to deceive or manipulate financial systems,” the report said.

“AI-driven phishing attacks, deep fake fraud schemes and AI-generated fake news about financial markets are emerging threats that institutions and individuals must guard against,” the report said. “As AI’s sophistication grows, so does the urgency to fortify cybersecurity measures to counteract these evolving fraudulent tactics.”

Marsh McLennan Agency notes that before April 2021 guidance from the Department of Labor, many plan sponsors believed that they could outsource their liability for cybersecurity breaches to third-party vendors. The report said plan sponsors increasingly understand their responsibility.

According to Mario Paez, national cyber risk leader at Marsh McLennan Agency, “Plan sponsors must demonstrate a commitment to monitoring and assessing their vendors’ digital protection continually.”

Related: The MOVEit data breach: A wake-up call for all retirement plan sponsors

The report argues that plan sponsors that work with retirement advisors on their employer-sponsored retirement plans can help protect against fraud and cybersecurity concerns.

“Retirement advisors are well-versed in the intricate security measures necessary to safeguard your employer-sponsored retirement plan,” the report said. “This ensures that your employees’ hard-earned savings are shielded from malicious cyber threats and fraudulent activities. They work with record keepers, employers and plan sponsors to establish robust cybersecurity protocols, conduct routine assessments and even participate in mock data breach exercises to preemptively identify vulnerabilities.”

No. 3: Inflation

Recent high inflation has made it more difficult for workers to save for retirement, particularly when considered alongside challenges such as student loan debt, high housing costs and rising auto prices, according to the report. Some workers have paused saving for retirement, and some have withdrawn funds from retirement accounts to cover pressing needs.

On top of that, Marsh McLennan Agency said that the explosion of information on the internet and the easy access of investment platforms has led to many younger investors tapping online forums, social media and other “unverified sources” for financial guidance – the kind of guidance that can lead to poor decisions.

Against that backdrop, the report said employers have a need to help provide access for their workers to professional financial advisors.

“To navigate effectively, individuals should prioritize the counsel of experienced advisors who can provide reliable and personalized insights, steering them away from the pitfalls of unqualified sources,” the report said. “As an employer, offering comprehensive financial well-being services to your workforce is an investment in their future.”

No. 4: A convergence of retirement planning and wealth management

As individuals increasingly prioritize long-term financial planning, financial advisors are shifting toward holistic, client-focused strategies that combine retirement planning and wealth management, according to the report.

“The shift in the approach of financial advisory firms goes beyond being a conceptual change,” the report said. “It is a substantial transformation that directly impacts the services they

offer. They are actively broadening their range to provide a more comprehensive and integrated approach to financial wellness. Consequently, individuals are better prepared to make well-informed decisions about their financial well-being, regardless of their life stage.”