Retirement Planning Won't Be The Same Anymore. Now We Have Wealthtech

What part does technology play in Retirement Planning? One more relevant than you might think. Financial Institutions have been resistant to changes, and their retirement savings services are not an exception. This industry, which has an estimated value of 36 trillion dollars, is slowly changing and adding tech into the equation. 

Because, let’s face it, Americans need help when it comes to saving. An analysis conducted by a Government Accountability Office stated that many retirees and workers approaching retirement have limited financial resources. About half of households with members over 55-years-old have no retirement savings at all. That’s bad news. Especially when you read that a reasonable sum for a comfortable retirement is $500,000.

But this is not just a thing for the almost-retired. Millennials are also involved

They still have some decades left until they need their retirement money, but they’re already taking care of it. Those born between 1980-2000 are seen as a shallow and unreliable generation, but the truth is that they’re doing a good job so far when it comes to retirement savings. According to a study by Dave Ramsay, millennials start saving at age 23, and 58% of them are already putting away some money for their retirement. It’s a good start (although things get trickier if we analyze the sums they’re saving… Which are, unfortunately, not enough if they want a comfortable retirement).

So, now that we’ve taken a look at the big picture, let’s go back to where we started.

How is technology involved in retirement savings? Both for those who are about to retire and for other generations.

Innovation is democratizing financial services

Technology has enabled access to financial services to those who could not otherwise hire a financial advisor. 

We actually talked about this when we listed the major trends in Wealth Management. Nowadays, not only the wealthy can hire an advisor. With tools such as robo advisors, financial services are more accessible than they’ve ever been.

Retirement planning is part of this new reality. Fintech companies are offering new tools and services that reach all kinds of customers. Not only the new earners, but also those who are close to retirement. 

And one of those tools are robo advisors. We talked about them, but not from the retirement planning point of view. 

When retirement planning and robo advisors meet, there’s an idea that comes to mind and that’s getting stronger over time: the possibility of a hybrid model.

Robo advisors are great - But a hybrid model is better

So robo advisors are a thing now. Everyone in the Wealth Management industry is aware of these new tools that use algorithms to create and manage investment portfolios tailored to your needs. And they are perfectly valid for retirement planning. 

Nowadays, robo-advisors only manage a small part of the total percentage of investments in the U.S. However, estimations say they’ll manage around $2 trillion by 2020.

How does a robo advisor help with retirement planning?

The process is really easy. You answer a series of questions in order to establish your preferences. Then, the robo-advisor matches those preferences (your risk aversion, your expected goals) with an investment portfolio that is rebalanced automatically. 

Some pros: they’re cheaper than human advisors, easy to use, accessible and they help you avoid emotional or irrational investments.

And some cons: they’re just robots. You won’t be able to call them if you’re worried about your investments. Also, they lack customization - you need to adapt to what they offer.

They’re a great tool for people looking for a hands-off approach when investing.

Maybe retirees need a hybrid solution

Technology adoption among seniors has grown steadily. In 2000, just 14% of seniors used the Internet. By 2016, the percentage had risen up to 67%. That’s an interesting point since, retirees are, indeed, seniors. 

However, this demographic group is still behind in the adoption of new technologies. They appreciate the human touch, and that’s not something they’re going to get when working with a robo-advisor. 

When you are thinking about selling all your assets or investing a considerable amount of money, being able to talk to a human advisor helps a lot. That’s why some companies are going towards a hybrid model. 

In this hybrid model, Wealth Managers offer an online platform where the users reply to specific questions without the intervention of a human advisor. This helps Financial Institutions reduce costs and get more clients. However, these clients are going to have questions, worries and suggestions. That’s where human advisors should be available. 

Retirement planning wealthtech innovation technology

Make your savings work as you’d like them to

In a recent article, financial advisor Robert Laura reflected about the way you should be using your retirement savings. From his point of view, the money in 401(k) accounts is a great tool to express your beliefs. 

For instance - there are vegans unknowingly supporting companies like McDonald’s. Or people against firearms, alcohol or tobacco that are investing in businesses related to any of those industries. 

It’s quite common that people invest “blindly”, using their money to help companies that are very far from the values they support. The way 401(k) programs usually work is not helpful: many Financial Institutions offer limited options when the customer needs to decide where to invest. 

But, why shouldn’t you decide to make your savings work as you’d like them too? 

ESG has a lot to do with this idea.

The importance of ESG in pension funds

Environmental and Social Governance (ESG) is increasingly popular among Financial Institutions and customers alike. 

Environmental, Social and corporate Governance are three criteria that investors take into account when choosing which firms they should invest in. ESG-conscious investors look for businesses that are:

  • Environmentally (E) responsible. Companies that are not generating excessive waste, polluting or impacting climate change, for instance.
  • Socially (S) responsible. Firms that take care of their employees, that promote volunteer work or help charities.
  • Meticulous with Governance (G). Businesses that use transparent accounting methods or that are generally responsible with their management practices. 

This isn’t just a “feeling” about a company. Big corporations are already publishing annual reports where they detail their ESG progress. 

What part does technology play in ESG and retirement planning?

It can be really difficult for an average investor to create a portfolio that is 100% ESG-compliant. However, you can rely on robo advisors. 

Certain robo advisors are already offering funds that follow Environmental and Social Governance criteria. The customer just needs to fund his or her account, and the algorithms will automatically invest and rebalance the investments.


Retirement planning is not the only thing that innovation in Wealth Management is changing. 

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