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Managed Accounts Have an Interest Gap

While a majority of plan sponsors see managed accounts as “very important” in attracting and retaining employees and helping them prepare for retirement, those workers don’t seem nearly as enthusiastic about the option.

New research from Fidelity finds that employers said that workplace managed accounts were “very important” to help employees prepare for retirement (57%) and ensure that employees are investing their retirement savings appropriately (53%). They also see it as a way to retain employees (51%) and attract the best employees to their company (49%).

Almost half (43%) of employers said that based on their experience employees choose workplace managed accounts because they don’t know how to properly allocate their investments, and 40% said it’s because employees don’t have the skills needed to manage their portfolios.

So, what do participants think?

Well, there’s an enthusiasm gap between managed account users and non-users. For example, while about half (48%) of managed account users said that the ongoing monitoring of their investments was one of the most valuable things about the offering, only 29% of non-managed account users said that they think it would be valuable. As for ongoing management, while 38% of managed account users said that ongoing management was valuable, compared to 23% of non-managed account users.

However, the survey suggests that those who don’t use managed accounts say that it’s because they don’t understand what is being offered: 39% of participants said they lack understanding of what is being offered or the benefit and a quarter said that not knowing enough about the offering is a major barrier. Echoing those concerns, 35% of employers said that employees don’t take advantage of workplace managed accounts because they don’t fully understand how it can help them, and 31% said that employees don’t understand the offering.

Control also plays a role. About a quarter (24%) of participants say that they like complete control, and 23% say they enjoy managing their investments themselves. A third (32%) said that worry about giving up control was a major barrier.

There were also concerns about fees. Roughly a quarter (23%) said that managed account fees are too high, and nearly two-thirds (62%) said that fees were a major barrier to signing up for workplace managed accounts.

When asked to identify the major reasons to sign up for a workplace managed account, 59% cited maximizing account growth; 49% cited ensuring accounts are properly diversified based on unique goals; and 45% cited working with a professional.

But when asked them about the value proposition of workplace managed accounts, 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.

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