Displaying items by tag: managed accounts

A recent deep dive by Cerulli Associates explored how defined contribution (DC) managed account users and non-users perceive the value of DC managed account programs.

Managed account users appreciate the time, energy, and stress saved by delegating 401(k) and retirement planning to professionals. They also value the human advice component and the employer’s vetting of the solution.

Many non-users were shown to be swayed by the human advice component of managed accounts and affected the fee structure they were willing to accept. Adding to this a meager 16% of non-advice users feel very confident in their investment strategy, while nearly all DC managed account users express strong confidence.

As the retirement industry shifts away from defined benefit systems, individual plan participants must educate themselves and implement effective retirement investment strategies. 

Finsum: Retirement accounts seem ready-made for managed accounts and clients seem to desire them based on this research. 

Building and maintaining meaningful relationships with plan participants is an ongoing challenge for 401(k) advisors. Demonstrating their value is vital. One powerful strategy lies in the skillful use of managed accounts, which showcase their investment expertise and enhance participant engagement.

Managed accounts allow advisors to personalize their investment guidance at scale. By collaborating with the right recordkeeping partner, advisors can craft the portfolio allocations within the program, thus affecting the allocations within individual accounts. This partnership enables both parties to highlight their value propositions: advisors provide strategic investment guidance, while the recordkeeping platform facilitates participant access to this invaluable services.

Ed Murphy, President and CEO of Empower, recently shared insights with planadviser.com on the strong demand for discretionary, personalized managed portfolios. He also commented that nearly 9% of their participants are enrolled in their managed account program, underscoring its value and appeal. Murphy's observations reflect a broader industry trend where participants seek personalized financial strategies, highlighting the importance of advisors integrating managed accounts into their service offerings.

Finsum: Implementing manage accounts within a 401(k) plan is an effective and scalable way for plan advisors to demonstrate value to participants.

As recently reported by PlanAdviser.com, payroll giant ADP has collaborated with Morningstar to introduce a proprietary managed accounts product to their over 100,000 DC recordkeeping clients. Morningstar emphasized the complexities today's plan participants face in retirement savings, particularly given the backdrop of high inflation and market volatility, which can be especially challenging f or those employed by smaller firms.

Chris Magno, Senior Vice President and General Manager of ADP Retirement Services, underscored the sentiment, stating, "Every retirement plan, irrespective of its scale, deserves access to tailored advice on a large scale."

It's clear why the availability of managed accounts continues to spread. Historically, DC plans have often presented their participants with two primary investment avenues: self-managing their portfolios or selecting predefined options like target date or balanced funds. Managed accounts, however, introduce a third, more collaborative method. These accounts consider not only age and risk preferences but also additional factors, such as assets held by participants outside their 401(k).

Integrating managed accounts can enhance the bond between advisors and participants. Advisors typically play a pivotal role in defining the managed accounts program guidelines and engaging with participants opting for this route. For advisors yet to explore managed accounts, they are worth a closer look. They support the plan sponsor's objective of helping their employees reach a secure retirement while fortifying the advisor's rapport with participants.

Finsum: ADP and Morningstar launch a managed accounts product for DC clients, bridging traditional retirement savings methods with innovative solutions.

(New York)

The fiduciary rule is in an odd sort of limbo. Despite being seemingly dead from a rule-making point-of-view, it is still very much alive as a practical rule that needs to be abided by even if it is not in full force. But is still surprising to learn, especially given all the hype over the rule’s possible dissolution, that 42% of all advisor-held US assets under management are now subject to the fiduciary rule. That figure is up from what would have been 24% in 2005 and 33% in 2010. The growth has come from the large number of firms seeking to grow their fee-based managed account programs.

FINSUM: That is a quite a high proportion of assets. We hope the DOL rule will not be implemented and the SEC will come up with a more effectual version.