Data & Research March 9, 2016

Fidelity Sees Plenty of Fuel for Managed Account Momentum

Employers increasingly view managed accounts as a powerful talent attraction and retention tool.
Reported by

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.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

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.

NEXT: A few lessons from the Fidelity book of business 

“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. 

Data & Research March 8, 2016

Secure Retirement Seems Unlikely to Most Gen Xers

Only about one-quarter of Generation X is highly confident they will have enough money to support themselves throughout retirement.
Reported by

Generation X’s skepticism about retirement may be warranted, according to a report from the Insured Retirement Institute (IRI). Overall, more than one-third of this demographic has nothing saved for retirement. Other research calls this generation by far the most stressed.  

While retirement may still be years away, only 8% of Gen Xers have enough saved to support themselves in retirement. Even among the oldest Gen Xers, those aged 44 to 53, only 11% have adequate savings. To determine if a Gen Xer has sufficient savings, IRI considered the amount needed for an individual to purchase a deferred income annuity that would generate enough annual retirement income to bridge the gap between the average Social Security benefit and average expenditures for a retiree.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

One problem could be that most Gen Xers—eight in 10—are DIY investors who manage their money without any professional guidance. Only one in five Gen Xers works with a financial professional. But Gen Xers who do seek professional advice are twice as likely to have at least $100,000 saved for retirement, compared with those who plan on their own. About eight in 10 Gen Xers describe themselves as being somewhat or not very knowledgeable about investing, and two-thirds rate their financial IQ as being average or low.

Those that have sought out advice say they are getting the help they need. More than eight in 10 say their financial adviser has discussed their plans for retirement, and seven in 10 of those who have consulted with a financial professional have had a retirement plan prepared for them. Gen X members who turn to professional services use them for investing (62%) and general financial management (45%).

The age people think they’ll be able to retire is creeping up: More than half of Gen Xers (58%) believe they will retire at age 65 or later, compared with 51% in the previous IRI study, and 42% in 2012.

NEXT: Worries do not align with actual calculations

Given their concerns about finances in retirement, it’s surprising to find that the study reveals relatively few (42%) have tried to calculate how much they need to save to live comfortably in retirement. But some good news is that, among those Gen Xers who have attempted to figure out how much they need to save, six in 10 have included health care costs in that calculation.

However, they miss the mark in terms of estimating how much health care might cost them during retirement. From age 60 on, retirees can expect health care to represent approximately 33% of expenses. About four in 10 Gen Xers believe health care will consume less than 20% of their income, with fewer than one in five estimating a more realistic 31% to 40%.

Other findings from the report:

  • Half of Gen Xers believe saving for retirement is their top financial concern;
  • Nearly six in 10 Gen Xers (58%) believe they will retire at age 65 or later, including 24% who plan to keep working until at least age 70;
  • Nearly two-thirds (65%) say they would return to the workforce if they ran out of savings in retirement, while six in 10 say they would attempt to scale back and live only on Social Security; and
  • Two-thirds of Gen Xers believe it is very important to leave an inheritance to loved ones.

“Pop culture may remember Gen Xers as the children of the ’80s seeking independence, yet it may be their quest for financial independence in retirement that becomes their lasting legacy,” says Cathy Weatherford, president and chief executive of IRI. “Gen Xers, while still lagging in overall savings, have time on their side. To ensure they can achieve a secure retirement, Gen Xers will have to exercise diligence in the years ahead by committing to increasing savings and contributing to their retirement plans.”

Produced every two years, this is IRI’s third study of Gen Xers. The report surveyed 805 Americans aged 34 to 53, between December 28 and December 31.

«