While advisor-managed accounts (AMAs) are relatively new to the DC market, they have gained some traction among providers over the past two years, according to a new report.
This is evidenced by a series of new AMA program launches and new AMA-related partnerships between recordkeepers, RIA firms and managed account providers, Cerulli notes in its June 2021 issue of The Cerulli Edge—U.S. Monthly Product Trends.
RIA aggregator firms, which typically operate in the mid-sized-plan market, have been the most active plan advisors in the AMA space. These include CAPTRUST, SageView, Resource Investment Advisors (part of OneDigital) and Pensionmark. For many of these firms, working with participants in a one-on-one capacity within a managed account setting allows them to deliver personalized advice to middle market and mass affluent DC participants in a scalable manner.
For plan advisors with both a retirement plan and wealth management practice, Cerulli suggests that AMA participant engagements could serve as “prime opportunities to attract new wealth management clients.” Participants also benefit from gaining access to personalized investment management and advice within their workplace retirement plan, which may be particularly beneficial in the years leading up to retirement, the report notes.
Cerulli observes that Morningstar launched an AMA platform in 2019. Other managed accounts providers, such as NextCapital and Stadion, also offer AMA platforms. Also in 2019, Empower began offering advisor managed account solutions on its recordkeeping platform, the report notes.
The AMA opportunity has also generated interest from asset and wealth managers. For instance, Franklin Templeton earlier this year announced plans to launch an AMA program in partnership with recordkeeper Vestwell, the report notes.
Cerulli further observes that larger RIA aggregator firms typically centralize investment-related decision-making with the home office, and this usually carries over to AMA portfolio construction, where advisors often construct portfolios using previously vetted or selected underlying investment products.
In many cases, the plan advisor is restricted to using investment products from the plan’s core lineup, but, in some instances, the plan sponsor may allow RIA firms advising the plan to include non-core investment options, Cerulli observes. However, the degree to which non-core investment options are used varies from one advisory firm to the next. As one RIA aggregator explains, “We don’t use non-core investment options in the AMA right now and, when given the option, we suspect the vast majority of plan sponsors are going to want to utilize core menu options.”
But according to managed account platform providers, some of their RIA aggregator partners are using non-core investment options that could potentially enhance the risk-return profile of their custom portfolios. In conversations with Cerulli, providers across the DC landscape predict AMAs will receive more widespread adoption in the years to come. “The trend toward personalization in the DC space is something that we are taking very seriously, and we think AMAs will be a big part of that. We’re getting a really positive response from aggregators and recordkeepers around AMAs,” according to one DCIO wholesaler quoted in the report.
Cerulli notes that for asset managers without a strong target-date series, achieving fund placements within RIA aggregators’ AMA models may result in “more significant, consistent inflows” than if the fund were simply being used as a standalone option on the plan’s core menu. “By familiarizing themselves with the investment methodologies (including asset classes and investment styles) employed by managed account providers and RIA aggregators within their AMA platforms, DCIO asset managers can more effectively position their standalone funds for this burgeoning, advisor-driven market,” the report emphasizes.