Managed Accounts Gaining Popularity

The demand for managed accounts is increasing as plan sponsors seek to provide participants with more customized solutions, Fidelity Investments says.

Plan sponsors are seeking managed accounts not only to provide personalized retirement solutions, but also for fiduciary protection in an increasingly complex regulatory environment, Sangeeta Moorjani, senior vice president of Fidelity’s Professional Services Group, told PLANSPONSOR.

Fidelity Portfolio Advisory Service at Work (PAS-W)—the company’s proprietary managed account offering for workplace retirement accounts—increased both participants and assets by 50% or more in 2012. Enrolled participants in the service grew by 57% in 2012 to 63,000 participants.

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The growth in Fidelity’s managed accounts is indicative of a larger industry trend, according to Fidelity. “With increased concerns about market volatility and investor uncertainty, both plan sponsors and their participants are opting for a more personal experience that provides management for their retirement portfolios customized to their plan lineup,” Moorjani said.

In 2008, PLANSPONSOR’s DC Survey found only 20.7% of plans offered managed accounts, compared with 2012, when managed account use was at 32.9% for the year across all industries and market sizes (see “Managed Accounts: Personalized Attention”).  

Moorjani said Fidelity sees all types of companies request managed accounts, ranging from strategic to small and mid-sized to tax-exempt clients. “This is because employers recognize that their employees need additional support to help them more effectively save for retirement,” she noted. According to Fidelity data, 56% of plan sponsor participants may not be properly allocated and 88% do not rebalance.

Fidelity clients have said they prefer managed accounts because employees need additional fund options that are not part of their typical retirement plan menu, Moorjani added.

PlanTools Unveils DB Benchmarking Module

The DB (defined benefit) Benchmarking Module was released for use by subscribers of PlanTools’ benchmarking solution.

The system, which includes more than 20 different service lines provided to DB plans, was designed for immediate use by subscribers of the PlanTools Benchmarking solution and has no data at the moment, according to David Witz, managing director of PlanTools. The firm’s database is organically added by the subscribers, he explained, and as more plans are added to the system, the data will become statistically significant.

PlanTools built what the market requested and said it is up to the market to populate it with data, so that the module delivers the data needed to evaluate fees. “The DB benchmarking module will only fail if our subscribers fail to enter data,” Witz said. “Now it is up to our subscribers to benchmark their plans.” Reliable benchmarking is a numbers game that provides accurate  information only when subscribers load the game, he said.

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PlanTools also plans to create modules for employee stock ownership plans (ESOPs) and 403(b) plans, and is collecting data for services offered to these plans. They expect to roll out new modules soon. “Although many of our users run 403(b) benchmarking reports under the current defined contribution environment, we believe a specific solution for 403(b) plans is the next step in the evolution of our benchmarking system,” Witz said. 

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