Though appealing in theory, the use of managed accounts (MAs) in DC plans has not only been low but also seems to be declining. According to research by the PSCA, only 3.6% of plans offer MAs, and plans using MAs as a QDIA have dropped from 7.2% in 2010 to 1.2% in 2012. Overall, less than 2% of all DC assets are in managed accounts.
Consultants cite several reasons for their reluctance to recommend MAs compared to other managed investment products (such as TDFs):
• Cost (averaging 35-60 BPs on top of underlying investments)
• Value compared to other options
• Need for participant interaction
• Lack of success measurement
But as plan sponsors and participants become more knowledgeable about saving for retirement and investing, will they continue to be satisfied with the one-size-fits-all approach of TDFs –where all people within a five-year window invest the same, regardless of health or wealth? Other options include LDI (liability driven investing), which is popular with DB plans where participant involvement is not required.
And when will we get the technology that allows participants to aggregate assets from old 401(k)s, IRAs and other accounts, to provide real investment advice?