Fidelity Sees Plenty of Fuel for Managed Account Momentum

Managed account adoption has grown as employees face greater market uncertainty and employers look for ways to attract and keep top talent.

New client survey data shared by Fidelity shows slightly more than half of U.S. employers (51%) see managed account offerings within a tax-qualified retirement plan as an important way to retain current employees, while 49% say managed accounts help to attract the best employees.

Sangeeta Moorjani, senior vice president of Fidelity’s Professional Services Group, explains that workplace managed accounts can serve as a “shock absorber” to help cushion investors from dramatic market swings. “Companies are providing the educational resources and direction needed to help employees recognize the value so they can take full advantage of savings opportunities,” Moorjani says.

Almost two-thirds (57%) of companies polled by Fidelity feel that workplace managed accounts are very important to helping employees prepare for retirement, while 53% say the service ensures employees are investing their precious retirement savings appropriately. About half (48%) of managed account users say that the “ongoing monitoring of their investments was one of the most valuable things about the offering.

Fidelity goes on to suggest that, for most workers and employers, “to know managed accounts is to love them.” Related to this, employees who didn’t already have a managed account were much less likely to value them, which Fidelity suggests is usually a result of not understanding the offering or the benefit.

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“Thirty-nine percent of employees who did not have a managed account said they lack understanding of what is being offered, and one-quarter said that not knowing enough about them is a major barrier to adoption,” Moorjani observes. “But when those same employees were walked through what a managed account is and how it offers ongoing professional management of their retirement accounts, over half (54%) said that the concept was relevant to them, 52% said they would find the service useful and 46% said they would like to find out more.”

Fidelity points out that 80% of its clients who adopt workplace managed accounts are also using educational programs “to help employees gain the knowledge they need” to maximize retirement outcomes. 

“Employers are realizing that education is a critical component in the managed account dialogue,” Moorjani concludes. “Employees seek professional guidance to help them navigate the uncertainty in the markets.”

Overall, Fidelity says use of its professionally managed account portfolios, across both retail and workplace distribution channels—continues to increase significantly year-over-year, with assets under management topping $212 billion in managed accounts in 2015.

According to the 2015 PLANSPONSOR Defined Contribution Survey, overall a little more than 30% of defined contribution plans in the U.S. currently offer managed accounts to participants. This rises to 44% when selecting for mega-sized plans with billions in assets.