Are You Ready for SECURE 2.0?
The SECURE 2.0 Act should help millions of Americans access retirement plans by January 2024. While the congressional act is complicated, the key takeaways are that:
- Congress will offer tax credits to small businesses that incentivize them to participate in retirement plans, which were previously too costly.
- Employer-sponsored plans will have auto-enrollment and automatic escalation of contributions to increase enrollment and savings levels.
This is great news for 40% of full-time private-sector workers whose employers don’t provide retirement plans. And it should be a tremendous opportunity for financial services institutions to offer products to 4 million employers who historically found retirement plans too expensive. The American Retirement Association estimated that 19 million new 401k plan participants could join over 500,000 new plans.
Will traditional 401k providers be able to innovate quickly enough to create this many new products and meet the SECURE 2.0 requirements?
Why Product Development at Financial Services Institutions is Challenging
Large financial institutions have traditional, sequential product development processes that can be time-consuming and resource-intensive. The process is dependent on specific resources, including actuaries, product and customer experience experts, and developers, which are in short supply. Financial institutions are also competing with start-ups and tech companies for these same resources. And when there are not enough resources, product development cycles become even lengthier.
As an industry veteran, my personal experience was that financial services companies could create any product they wanted in 8-12 months and with a couple of million dollars. This meant that they were only going to market with one or two new products a year. To capture the SECURE 2.0 small business market, they will need to create more products, more quickly. And if they can’t, they may find themselves competing with the government, which will step in and service the small business retirement plan directly if the private sector isn’t competitive.
How can Financial Services Prepare for SECURE 2.0?
To capture the SECURE 2.0 opportunity and build plans for up to 19 million new participants, traditional financial services must find a way to accelerate the product development cycle. That means streamlining the sequential nature of the process and reducing the reliance on scarce resources. While that may sound difficult if not impossible, new no- and low-code solutions are making it not just possible, but relatively easy.
Products like Coherent Spark enable teams to reduce the time to market by transforming legacy business models and calculations into code in minutes, with no specialized skills required. By connecting these models in a cloud-based environment, analysts can quickly test thousands of simulations without waiting for IT to code anything. Spreadsheets are supercharged and innovation replaces lengthy development cycles.
Using Coherent Spark, a financial services company generated 86,000 lines of code in 3 months without using the development team. They saved $6 million dollars in project management costs and dramatically accelerated their time-to-market.
Need Help Navigating SECURE 2.0?
SECURE 2.0 represents a tremendous opportunity to capture new business, but also a tremendous amount of new product development work. Don't miss out on this opportunity to stay ahead of the curve and make the most of SECURE 2.0. Contact Coherent today.
