RETIREMENT Optimizing operations for retirement administrators: aligning people, processes & technology. Let go.

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1 RETIREMENT Optimizing operations for retirement administrators: aligning people, processes & technology Let go.

2 01 Optimizing operations for retirement administrators: aligning people, processes & technology 60% of financial organizations will embrace global business services (GBS) over standalone outsourcing and shared services by Some wealth managers have indicated potential annual cost savings from outsourcing between 20-30%2 Market pressures are forcing retirement administrators to offer innovative products and services while keeping up with expanded workloads and rapidly changing regulations. To address these challenges, providers must operate more efficiently to keep costs low and implement state-of-the-art IT solutions that deliver scalability and business agility. Yet, many are constrained by their existing technology, infrastructure and processes. Many are grappling with implementing new models to deliver uninterrupted (24/7/365) service to customers a potentially expensive and complex undertaking. Hiring and training a skilled global team of employees to keep up with increasing back-office processing loads can further divert attention from focusing on activities that add value. This whitepaper describes how managed services, including IT and business process outsourcing, can help retirement administrators address these challenges, while improving cost efficiency and adding value to grow their business. IT outsourcing allows recordkeepers to have their software and systems hosted in a secure, compliant, and accessible environment. By leveraging software based on retirement industry best practices that addresses evolving market and legislative requirements, providers can improve efficiency. They can take advantage of state-of-the-art and current technology platforms to easily add new products and services. Because these services are often available through the cloud, they deliver cost effective scalability and robust disaster recovery. Business process outsourcing allows retirement administrators to outsource back-office functions such as operating call and processing centers, performing mail tasks, and data entry in order to focus on value-added activities. Recordkeepers can leverage centers of excellence to improve customer service without the tremendous investment required to build and staff such centers themselves. They can also leverage highly qualified employees on a variable cost basis, as needed. 62% of organizations will be extensively investing in GBS (hybrid, integrated outsourcing and shared services) delivery over the next three years 3 1 HFS, A LEADING ANALYST AUTHORITY ON GLOBAL BUSINESS OPERATIONS STRATEGIES, CEB TOWERGROUP - OUTSOURCING OPPORTUNITIES AND CHALLENGES IN CAPITAL MARKETS 3 HFS RESEARCH,

3 Optimizing operations for retirement administrators: aligning people, processes & technology 02 New demands require new approaches Retirement administrators today face challenges from both their front-office and back-office operations. They must respond to new demands resulting from emerging market and demographic trends as well as regulatory changes. Success depends on their ability to maintain a laser focus on improving their core business operations while reducing costs. Retirement operations are growing increasingly complex. With 7,000 Americans turning 65 each day 4, retirement administrators workloads for handling disbursements are expanding rapidly. Providers must hire and train more people not to mention manage turnover, rehiring and retraining for tasks that often offer little competitive differentiation. Meeting new fiduciary standards for the nation s key retirement programs requires providers to establish, document, and follow more prudent investment policies, document compliance, and provide fiduciary training to employees and advisors. Providers must also keep up with rapidly evolving financial industry regulations. New disclosure requirements mean retirement administrators must better educate customers about the value they receive for the fees they pay. Retirement administrators must shift their focus to strategic growth opportunities. A responsive inside sales support desk is necessary to provide an exceptional client experience and build strong relationships with distribution channels. Providers need to offer the investment products participants and sponsors demand from target date funds to guaranteed income vehicles. Plan sizes are shifting with assets in smalland micro plans growing more quickly than those in mega plans. Larger providers are looking to grow globally by moving into new high growth geographic markets such as Latin America, Asia and the Middle East. And with fewer than one-half of U.S. workers preparing for retirement 5, providers are placing a high priority on educating clients and helping them with planning. THE CLIMATE More and more financial services firms are outsourcing services in order to generate cost and operational efficiencies. More than one-third of finance CEOs expect to outsource a business process in the next 12 months. 6 33% of IT executives plan to increase spending on new vendor SaaS in the next 24 months. 7 The total spend on outsourcing will grow at an 11% CAGR through % of large banks expect to increase their spending on new BPO contracts over the next 24 months. 9 As organizations serve new generations of plan participants, they find it necessary to communicate with them using new channels. These channels include Webinars, podcasts, text messages, social media such as Facebook and Twitter, websites, and mobile applications that work with devices ranging from smart phones to tablets. Keeping up with the technology necessary to manage so many different platforms can be cost prohibitive. 4 NAVIGATING THE CHANGING LANDSCAPE OF RETIREMENT PLANNING, BY CATHY WEATHERFORD, ON WALL STREET, FEB2013, VOL. 23 ISSUE 2, PA5, FEBRUARY RETIREMENT CONFIDENCE SURVEY, EMPLOYEE BENEFIT RESEARCH INSTITUTE 6 CEB TOWERGROUP BLOG: OUTSOURCING: INCREASED PROFITABILITY, DECREASED SPENDING 7 AITE GROUP: 2012 FINANCIAL SERVICES - IT APPETITES AND EXPECTATIONS 8 CEB TOWERGROUP BLOG: OUTSOURCING: INCREASED PROFITABILITY, DECREASED SPENDING 9 AITE GROUP - LARGE BANK - CIO SURVEY, 2012

4 03 Optimizing operations for retirement administrators: aligning people, processes & technology Balancing IT and business solutions Both technology and operational issues currently make it difficult for retirement administrators to tame back-office complexity, reduce costs, deliver new products and services, and communicate over new channels. Managed services, including IT outsourcing (ITO), and business process outsourcing (BPO) can help retirement administrators overcome these challenges. As a result, analysts predict that spending on outsourcing will double through 2015, reaching more than $116 billion an increase more than twice as fast as traditional IT investments 10. Solving technology challenges with IT outsourcing Retirement administrators ability to adjust to emerging regulations, operate more efficiently, bring new products to market, communicate over new channels and confidently scale their operations depends on the flexibility and scalability of their IT platform. Yet many providers continue to rely on proprietary or legacy applications and databases. These platforms are difficult and costly to maintain, upgrade and integrate. Most are not nimble enough to easily support new products, services or legislation. They re difficult to scale cost effectively. Lack of consistent data formats makes it difficult to access client data from different systems, which means considerable manual rekeying of data. Lack of reporting mechanisms make it difficult to accurately determine participant costs. Creating automated workflows, making changes and performing integration can be difficult, complex, and expensive because of multiple systems often running on numerous architectures. Large capital investments are required to maintain and grow the infrastructure. IT outsourcing allows retirement administrators to take advantage of state-of-the-art recordkeeping applications and IT infrastructure while outsourcing the implementation and maintenance of these systems. At the same time, providers can leverage global data centers to host their software and IT systems in a secure, compliant, and accessible environment while controlling everyday recordkeeping operations. Benefits of IT outsourcing include the ability to: Improve efficiency by leveraging best practices Retirement administrators can instantly take advantage of a platform that leverages best practices developed across a wide range of similar companies. Take advantage of a standardized, state-of-the art technology platform: THE SPEND The demand for investment outsourcing was expected from corporate and defined benefit pensions, foundations and endowments, but a newer area is trending faster than was anticipated, defined contribution outsourcing. 11 Annual external GBS expenditure surpassed $40 billion in 2013 and increase to $73 billion by % of respondents have increased their investment in technology, and 38% in analytics that reduce reliance on labor 13 Outsourcing will account for 23% of the financial services industry s total IT spend by Data management and reporting: Technology platforms incorporate a full range of workflow capabilities. These platforms make it easy to quickly and accurately onboard data by providing rules and wizards to streamline processes for validating data. The platform can replicate data across multiple applications to eliminate redundant data entry. Workflow: Enabled by straight-through processing, workflow can be easily created and customized to simplify automation of complex business processes. Dynamic client experience: Data, analytics, reporting and productivity tools help advisors enhance service to participants, reduce costs and meet their fiduciary responsibilities. Because the platform is based on state-of-the art technology, it easily accommodates new forms of client servicing such as Web and mobile. 11 NEPC, JANUARY HFS RESEARCH, HFS RESEARCH, 12-16, CEB TOWERGROUP: OUTSOURCING OPPORTUNITIES & CHALLENGES IN CAPITAL MARKETS

5 Optimizing operations for retirement administrators: aligning people, processes & technology 04 Achieve cost effective scalability through the cloud Cloud-based platforms can scale larger or smaller to accommodate varying numbers of participants, plans or assets in various market sizes. At the same time, the subscription based Cloud model reduces the need for capital investments. Recordkeepers pay for only what they need, when they need it. There s no need to overprovision to take into account future growth. Mitigate compliance risk The IT service provider can rapidly change its technology and services to enable clients to remain compliant with evolving legislative requirements. Use the most up-to-date technology Because the IT service provider is responsible for upgrades, providers can rest assured that they re running on the most modern infrastructure without having to implement and test Deliver mission critical recovery Mission critical recovery processes enhance compliant disaster recovery. Addressing operational challenges with business process outsourcing Retirement administrators attempting to improve service to customers are looking to implement comprehensive service delivery methods that allow them to offer 24/7/365 support. These centers of excellence promise to serve participants and sponsors by continually monitoring jobs, ensuring critical processing deadlines are met, and providing immediate access to product development teams who can resolve issues. To set up service centers themselves, providers would need to build facilities and hire large teams of employees for operational support. These are expensive and frequently pull resources away from core services. OUR VIEW Firms want to bundle software with professional services, custom application development and thought leadership. Adhering to best practices and global certifications and standards will help outsourcing providers offer customers more efficient and higher quality services. Regulatory and operational risk requirements are leading firms to look more closely at the integrity of outsourcing service providers. Providers are challenged to hire, train, and retain high-quality, engaged employees with the latest retirement industry and technology knowledge to manage back-office processing. They may also need easy access to additional resource bandwidth to accommodate peak processing times, such as enrollment months or simply to manage the growing number of retirement disbursements. Business Process Outsourcing (BPO) gives providers the opportunity to outsource common back-office functions. BPO includes hosting software and delivering staffing services that can include mail room operations (e.g., scanning, sorting, posting), data entry for plan setup and participant data, transaction processing, and recordkeeping (e.g. trading, payments, disbursements and reporting, document preparation, and government form submissions.) Outsourcers deliver a flexible, customized solution that allows providers to use the best of their own and the outsourcer s capabilities.

6 05 Optimizing operations for retirement administrators: aligning people, processes & technology By taking advantage of BPO, record keepers can: Generate revenue streams BPO can help generate revenue streams by improving cycle times and reliability of key business processes. These services also increase flexibility to scale operations based on market demands and legislation. Focus on value-added activities Retirement administrators can outsource back-office services that add little value to the client. As a result, they can focus on servicing constituents, educating participants, building strong relationships and exceeding service level agreements (SLAs) for participants, sponsors, and advisors. Leverage global centers of excellence Providers can leverage global service centers. These centers are staffed by people with deep expertise in the retirement industry and equipped with the appropriate technology for continuous (24/7/365) job monitoring and critical issue resolution. Leverage highly qualified employees Recordkeepers reduce the stress of finding and retaining high-quality engaged employees with higher skillsets. This reduces training and hiring costs associated with staff turnover. Eliminate cumbersome workflow Many of the tasks associated with daily recordkeeping are repetitive in nature. BPO providers streamline these processes by automating workflows based on proven procedures and implementing lean, six sigma teams to reduce costs. Reduce Overall and CapEx costs BPO can significantly reduce operational costs by performing them in a more efficient environment, including leveraging on- and off-shore destinations for service delivery. Additionally, providers can take advantage of existing global data centers for a monthly subscription cost rather than having to build, equip, and staff them themselves. OUR VIEW The Business Process-as-a-Service (BPaaS) model will gain momentum. Firms will continue to seek software solutions delivered on a software as a service basis to create a single, customized solution. IT executives will outsource more IT infrastructure and application management services to help reduce total cost of ownership and free up internal resources. Firms will look to managed services providers to operate and maintain new and complex initiatives such as big data and smart grids. Operate in a transparent environment An outsourcing organization prices their services by the participant and sends a statement, which details participant costs. This enables predictable cost models for participants, allowing providers to adhere to fee disclosure regulations. Ironically, it can be difficult to track costs when data centers are implemented and managed internally due to numerous hidden costs. Mitigate risks A BPO can provide in-depth industry and system knowledge across all processing areas. A tenured front-line management team provides training and oversees all processes. All processes are monitored and exceptions are immediately reported to the management team and the provider.

7 Optimizing operations for retirement administrators: aligning people, processes & technology 06 Case studies Administering growing numbers of participants with BPO services SunGard temporarily administered the back-office functions for defined contribution and workflow services for one of the nation s top 10 retirement administrators in order to enhance and streamline current operations. SunGard provided services that included mail room, data entry and evaluation review, Optical Character Recognition (OCR)/Intelligent Character Recognition (ICR) data capture and automated customer correspondences. This engagement allowed the firm to handle administration for an additional 69,387 participants with 99 % accuracy without increasing costs as requested. 100% accurate tax remittance administration One of the nation s top ten ranked recordkeepers chose SunGard to administer its payment and disbursement processes. SunGard provided services that included tax remittance and tax filing according to IRS requirements, tax form rebalancing and printing, check and EFT issuance and DDA reconciliation. SunGard was able to administer the tax remittance for nearly $5 million in assets with 100% accuracy. SunGard helps recordkeeper meet crucial deadlines A longtime SunGard customer and retirement services provider faced the risk of not meeting a crucial government reporting deadline because it had insufficient capital and time to staff the necessary resources to comply with federal regulations. It chose to outsource its retirement document services through SunGard. The SunGard team implemented the service quickly enough to allow the team to meet its deadline and remain compliant cost effectively. Managed services evolve operations and grow revenue By taking advantage of managed services such as IT Outsourcing and Business Process Outsourcing, retirement administrators gain access to the most up-to-date and flexible technology and can choose from a full range of back-office services. IT Outsourcing gives providers the flexibility to offer more products, services, and communications channels to differentiate their services. It allows them to reduce costs by operating more efficiently and by paying for only the IT services they need when they need them. By outsourcing some or all of their back offices services, retirement administrators gain access to employees with expertise in retirement and technology without hiring hassles and can better focus on the services that differentiate their organization. Access to global data centers allows delivery to provide uninterrupted service to plan sponsors, participants and advisors. The greatest challenges to achieving BPO benefits are: the inability to adequately leverage and exploit data analytics; business enablement of IT; attraction, retention and talent management requirements in the organization; and enabling end-to-end process management across functions and geographies. 15 HOW WE HELP Pursue opportunities in new markets and diversify revenue. Increase efficiency through a mix of software and services. Leverage innovative technologies to strengthen client relationships. Differentiate yourself from the competition with focus on core competencies. 15 HFS RESEARCH,

8 About SunGard Wealth and Retirement Administration SunGard provides wealth management and retirement technology and services that help banks, trust companies, brokerage firms, retirement plan administrators and advisors accelerate asset growth and optimize operations to achieve better outcomes for the end investor. We provide solutions for client acquisition and communication, transaction management, risk and compliance, portfolio accounting, plan administration and reporting that can be deployed as stand-alone products, part of a unified platform, or outsourced services. Enabling the Adaptive Enterprise Sitting at the intersection of technology and finance, SunGard is focused on delivering fresh ideas and inventive solutions to help our customers adapt and thrive in an ever changing environment. With a blend of software solutions, cloud infrastructure, global service capabilities and deep domain expertise, SunGard is capable of supporting virtually every type of financial organization, including the largest and most complex institutions in the world. For more information, please visit twitter.com/sungard getinfo@sungard.com linkedin.com/company/sungard 2015 SunGard. Trademark Information: SunGard, and the SunGard logo are trademarks or registered trademarks of SunGard or its subsidiaries in the U.S. and other countries. All other trade names are trademarks or registered trademarks of their respective holders. WRA4269