NEPC’s Emma O’Brien was quoted in a recent Pensions & Investments article which focuses on why stakeholders are cautious over generative AI. View the article on Pensions & Investments’ site here.
These days, the use cases for generative artificial intelligence are ever expanding— SEC Chairman Gary Gensler has called it the “most transformative technology of our time,” on par with the internet and the mass production of automobiles —but while retirement industry stakeholders say the tool will have major implications for defined contribution plans one day, record keepers and service providers are taking a cautious approach.
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Although generative AI is an incredible tool, the application is risky for DC plans in its current state, said Emma O’Brien, Boston-based senior consultant for the NEPC LLC defined contribution team.
“The tool can become self-confident; there’s the chance of hallucinations, meaning the model can generate false outcomes or information, so while it’s powerful, the application needs to be regulated to protect participants,” she said. “We’re hearing from record keepers that are in the early stages of testing the application that they’re going to be really cautious for now.”
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Willis Towers Watson’s Mr. Levinson and NEPC’s Ms. O’Brien each said their firms do not ask for participants’ personally identifiable information, but do seek data like age and the investments to which participants are allocating.
“Record keepers have the ability to provide very useful plan data which NEPC can leverage to provide customized advice for each plan based on the participant base,” Ms. O’Brien said.
NEPC analyzes plan data to estimate each participant’s expected risk and return based on their allocation as well as the expected risk and return for each option in the plan, she added. “Through that study we’ve been able to improve participant outcomes because they can help us quantify an overall risk profile that might be higher or lower than desired, and it can identify holes in the lineup or find unintended redundancies between investments,” Ms. O’Brien said.
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