Though TDFs still have a long runway, everyone knows that eventually we should be able to use readily available participant data and technology to create customized managed investments. To that end, Schwab is doubling down on customized managed accounts as well as financial advisors.
Schwab is opening up their 1,100 bundled DC plans with $135 billion to advisors that want to leverage Morningstar technology to create up to 101 unique portfolios and assign participants based on data from Schwab’s record keeping system. Advisors can dial up or down the risk equity profile using asset allocations and investments selected by the advisor.
Participant data points used to assign appropriate portfolios include:
- Age
- Account balance
- Salary
- Saving rate
- Estimated Social Security benefits
- Employer contribution formulas
- Related retirement plans
- State of residence
- Marital statu
- Gender
Cost for the Schwab customized managed account service is comparable or less than the 40-45 BPs that other programs charge plus whatever the advisor wants to add for their services.
So now we have a DCIO (Russell), TAMP (Envestnet) and record keeper (Schwab) offering customized managed portfolios leveraging record keeper data. Schwab claims that their qualified phone reps separate their service. Eventually, outside assets will be brought into the mix which is likely why Envestnet bought Yodlee and Morningstar purchased ByAllAccounts.
