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QDIA 2.0?

Managed Accounts

In a feature story in the Fall issue of NAPA Net the Magazine, Judy Ward reports on the movement toward using managed accounts as qualified default investment alternatives.

Pensionmark Financial Group started developing its Portfolio Advisory Services two years ago, and CEO Troy Hammond sees the advisor managed accounts as part of the natural evolution of the Santa Barbara, California-based firm. “If you think about the DNA of our firm, we’ve always focused on participant outcomes. Over the past 30 years, that has evolved into us having a full-fledged financial wellness platform, and that includes our participant advice service and now our managed accounts,” he says. “In the sequence, it starts with participant education, then it goes to engagement, then participant advice, then managed accounts, then on-site financial coaching.”

Participants’ investment portfolios got better in the wake of auto-enrollment and default investments, but lacked personalization, Hammond says. “As we started offering participant advice and talking to them, the options were to help them build an investment portfolio or direct them toward their plan’s target date funds—which is fine, but the target date fund’s allocations aren’t going to be personalized for them. Target date funds have done amazing things for our industry, but they’re a one-size-fits-all, cookie-cutter option. We realized that we needed to be able to offer people a ‘next level’ of investments: a managed account personalized to them.”

Shifting Role

As the role of the plan advisor shifts, more advisory firms have started offering a managed accounts service, echoes Dan Bruns, Chicago-based head of managed solutions at Morningstar, Inc., which has partnered with Pensionmark on the advisory firm’s service. “Plan sponsors are now asking for more out of their advisor: They want to know, what can they do to help enable participant success?” he says. “What better way is there to help a participant reach success than to go to them and say, ‘I built a personal financial strategy for you. Here is how you should invest your money, based on your unique situation. Here’s how much you need to save for your retirement. Here’s when you can expect to retire, and here’s when you can take Social Security to maximize the value for you.’ An advisor managed accounts program allows you to do all of that, and do it at scale.”

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