Neobrokers aren't new. Plan advisors have watched them grow for years. But their
A growing share of assets that once would have automatically flowed into plans through the workplace are being intercepted by neobrokers. Some now offer retirement accounts with instant 3% matching contributions: No employer in the loop, no waiting, no hassle. The race is on.
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The changing reality of employment
The traditional retirement savings model is built on the traditional employment model. Fast forward to today: An on-demand, 24/7, consumer-first economy has necessitated a
The official gig economy is projected to triple and reach $2 trillion by 2033. Half of those workers have no access to benefits of any form. Roughly half of Gen Z and a third of millennials work more than one job. For an increasing proportion, there is no contest between the cumbersome, inflexible traditional system and the platforms already on their smartphones with retirement saving options and simplicity built in.
For three-quarters of millennials (and over 90% of Gen Z), social media is their primary source of financial information. The top 3 "finfluencers" in the U.S. have over 100 million followers, subscribers and TikTok likes. Neobrokers — who also provide finfluencers' content — are shifting the basis of relationships from narrow product expertise and provision to relevance, engagement and convenience.
A gap is opening between needs and preferences on the one hand, and provision on the other. Unstable employment and immediate income needs exclude many younger workers from the traditional system. Many older savers face complex drawdown decisions they are not equipped to make. And rigidly standardized products struggle in the face of the complexity of an individual's reality.
The demand side of the equation continues to grow in size and complexity, and the problem is as obvious as it is important, so why hasn't it been solved already?
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The architecture problem
A recent Franklin Templeton survey of 52 firms responsible for $18 trillion of retirement assets surfaced broad agreement around the structural limitations: Fragmented data, decades-old technology and the omnipresent spectre of litigation have left the industry in a catch-22. Providers know they need to change, but change is perceived as too expensive, too risky, or both. So the situation gets worse, creating more pressure for change. But change is unpalatable, so it is postponed and the cycle continues.
The traditional system is built on standardisation, to reduce costs and broaden participation. But the same standardisation that fueled the rise of target-date funds also masks significant, and potentially risky, variation. At age 50, for example, equity allocations can range from 49-86% depending on the provider. Given the wide return gap between equities and bonds, the arithmetic of compounding and the fact that roughly 80% of Gen Z retirement savings sit almost entirely in target date funds, the need for a better solution is clear.
No single, one-dimensional product can fully address this challenge, because no individual is truly 'average' in their needs, work patterns, or values. Individual solutions must be rooted in data and be dynamic, holistic and realistic.
But data today is narrow, guarded and scattered. Recordkeepers, asset managers, and plan sponsors each hold fragments of the mosaic, but no one sees the composite, never mind complete, picture of the individual. By contrast, when that same person uses a neobroker, the platform is set up to ingest data on spending, saving, trading, and social media behavior. Every interaction generates data that enables personalisation and improves prediction.
History suggests that incumbents overestimate the durability and effectiveness of regulation and friction as a defense against disruption. When the iPhone launched in 2007, dominant mobile players appeared untouchable. Netflix didn't win because people stopped watching films — it won by offering a better way to access them. Consumers stampeded.
Parts of the retirement industry now face a similar inflection point. If the traditional, plan-based system cannot evolve to meet changing expectations, this could be its Blockbuster Moment. You can't monetize a relationship you no longer have.
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Where this is headed
These problems can't be solved within the limitations of the current system's technology, structure, or incentives. If it were possible, it would have been done already. But change is happening outside the system.
The U.S. administration's positive stance on digital assets is accelerating the industry shift that was already underway. Blockchain-based infrastructure will displace and ultimately replace the traditional architecture of siloed accounts, splintered systems and endless reconciliations.
As the superior functionality and efficiency of cryptographically protected wallets displace accounts, and as smart contracts and AI agents in wallets automate swathes of administrative processes, fragmentation and inflexibility will undergo radical reductions. Data will be able to live with and follow individuals across jobs and providers. The programmability of assets will create new ways to add value and personalise outcomes. The migration of financial assets on-chain will be followed by benefits, and ultimately retirement accounts. On-chain wallets can, and already do, hold a lot more than assets.
Understanding the competitive implications of these technologies, and the new possibilities they create to add value to clients, is not a nice-to-have — it may well be existential.
As William Gibson famously wrote, "The future is already here, it's just not evenly distributed." We are already experiencing it as consumers, and it is coming to retirement. Corporate history is littered with the remains of immensely successful firms that chose to wait for the future to happen to them. Now, they exist only in history books. That is not a first-hand story anybody wants to be telling their grandkids on the porch in their retirement.
