Sponsors See Value in Managed Accounts

Fidelity Investments reported 784 new plan sponsors joined the Fidelity Portfolio Advisory Service at Work (PAS-W) program—the company’s proprietary managed account offering for workplace retirement accounts—during 2013. Sangeeta Moorjani, senior vice president of investment services at Fidelity in Boston, tells PLANADVISER a couple of factors contributed to this rise in demand. Not only are plan sponsors much more focused on making sure participants are retirement ready, they’re also seeking help managing their fiduciary risk, and from the plan participant perspective, employees seem to need more and more assistance.

Recent Fidelity research found 77% of respondents admitted they did not have the skill, will or time to manage their own investments. And among Fidelity participants who did take an active role in managing their savings, another study showed more than half (53%) did not have the appropriate asset allocation for their age group.

Moorjani explains that managed accounts within retirement plans consider employees’ overall financial situations—including risk tolerance and assets/savings outside the plan—and construct a portfolio personalized to the individual using funds within the plan’s investment lineup. Fidelity offers a multi-channel model, with which participants can either speak one-on-one with an adviser or interact with the account manager online, and receive print summaries to help them as well.

Plan sponsors who choose to offer a managed account in their fund lineup are providing participants with professional help with retirement savings, Moorjani says. They are also offering participants a more personalized and appropriate asset allocation.

However, offering a managed account requires education so employees take into account whether they need such personalization. According to Moorjani, participants who need more personalization include those with more complex financial situations—multiple retirement accounts, spousal income and a low risk tolerance. Participants should also be informed of additional fees for managed accounts; plan sponsors should make sure they understand the fee they are paying and the value they are receiving for that fee.

When considering a managed account option, plan sponsors should make sure the provider is experienced with managed accounts, Moorjani suggests. Plan sponsors should also consider the need for a multi-channel model to address participants’ different preferences for access to information—face-to-face, online or on paper, she says. It is important to look at the level of personalization the solution is able to offer participants, and it is critical for plan sponsors to understand whether the provider will offer fiduciary oversight of the account, she adds.

While there are many different managed account providers, Moorjani believes what differentiates Fidelity is its experience—more than 20 years offering both institutional and retail managed accounts—its mutli-channel model, and the fact its managed account is completely integrated into the overall plan experience.