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Half of All DC Participants Have Access to a Managed Account, But…

Though managed accounts will not be overtaking the nearly $800 billion in TDF assets anytime soon, they are gaining traction, according to Cerulli. So what’s holding them back, and what’s their place in DC plans?

From 2009 to 2014, Cerulli reports, the percentage of plans offering them has doubled to a high or 22%, and because more larger plans offer them, 50% of DC participants now have access to the option. However, consider that although Financial Engines boasts over $188 billion AUM, which accounts for 60% of assets in DC managed accounts, just 7% of participants with access use them.

The reasons why managed accounts are not more popular include:


  • costs;

  • lack of benchmarking; and

  • no clear benefit over TDFs.


Of course, the biggest reason is probably inertia. It’s hard to get participants to engage. But does that mean we should give up trying? Not all workers born within a 5-year span have the same investment needs, especially as they ease into their decumulation phase, when retirement income planning becomes essential.

Some groups are going halfway, customizing TDFs to offer moderate, conservative and aggressive versions of a traditional suite of age-based investments. And some new robo-record keepers only offer managed accounts that become more customized as investors supply more information.

So while TDFs are perfect for the “set it and forget” approach that seems to have overtaken the DC world, there’s a danger of people not engaging in their retirement and financial planning. That danger can be avoided — starting with managed accounts.

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