Vestwell Managed Account Platform Helps Advisers Meet Needs in Small Plan Market

Joshua Forstater, senior vice president of partnerships at Vestwell, says the firm has seen that advisers are looking to Vestwell’s recordkeeping platform as a way to scale up in the small defined contribution (DC) plan market.

“Advisers want to talk about investments, education and financial wellness, but they get bogged down with administrative issues,” he adds. “This presents a problem when working with smaller plans because it becomes cost prohibitive.”

To address the advice issue, Vestwell and Franklin Templeton have partnered to build an adviser managed account experience. The new offering, which was announced in January but recently went live, combines Franklin Templeton’s proprietary Goals Optimization Engine (GOE) methodology with Vestwell’s recordkeeping infrastructure to create an entirely digital, open-architecture and cost-effective managed account solution. The offering will live natively in Vestwell’s platform, with the ability to automatically enroll participants into a personalized investment strategy.

During a demo of the managed account solution, Forstater showed how advisers can offer the platform with their own branding. A dashboard allows advisers to see client plans’ stats, including participation rates, as well as investments offered by the plans. Advisers can also drill down to the participant level to see how participants are invested, as well as their account balance, age and deferral rate.

Participants using the platform can see their account balances and contribution rates, as well as change their beneficiary information. They have the option to use a goals-based strategy, which will enroll them into the managed account program. Payroll and demographic information for participants is pulled into the managed account program from the recordkeeping system, and certain assumptions are defaulted, such as the expected retirement date. Participants can edit the information; for example, they can determine how much they will save, how much they will spend in retirement, their retirement date and their risk tolerance.

Forstater explained that once goals are set, Franklin Templeton’s GOE uses an application programming interface (API) to generate in real time the optimal portfolio for the participant to reach those goals. The system automatically invests and updates every quarter.

The platform has a fully open architecture, so advisers can determine which funds are offered to participants. “We let advisers pick the funds and open up additional levels of customization, such as choosing asset classes,” Forstater says.

He also notes that the platform shows participants how much retirement income their accounts are generating, how much they will need in retirement income and ways to close the gap. Participants can just click a button to apply changes.

“We’re seeing plan sponsors want to default participants into managed accounts so they can get a more personalized experience than age-based TDFs [target-date funds],” Forstater says.

He adds that the Vestwell/Franklin Templeton program is priced basically at one-third of other managed account products. “For most clients, the all-in cost is less than or equal to an actively managed TDF,” he notes.

Forstater says that over time, Vestwell will integrate other data points, such as expected Social Security income and income to be generated by other savings accounts, and will include considerations such as a participant’s emergency savings or expected health spending in retirement.

Vestwell also plans to include more nudges for better savings behaviors in addition to the options to close retirement income gaps that are already included on the platform.