Despite solid growth, defined contribution (DC) managed account assets are being significantly under-utilized by retirement savers according to the latest research from Cerulli Associates.
A new report by the global research and consulting firm examines why it may be, and what plan advisors might be able to do about it. While findings indicate strong year-over-year growth, total managed account assets among the eight providers surveyed only represent roughly 4 percent of total DC assets.
“Managed account adoption in DC plans face a number of barriers,” said Jessica Sclafani, a director at Cerulli, “including cost concerns, lack of participant understanding and lack of qualified default investment alternative (QDIA) status.”
The consulting firm suggests positioning a managed account service as a retirement income solution and focusing on the additional capabilities this type of service offers—such as its potential for improved customization, savings rates and diversification.
“While the DC industry continues to wonder how to best structure in-plan retirement income solutions with guaranteed interest components, managed accounts are quietly making progress as a less controversial option for plan sponsors to offer participants,” Sclafani explained.
Among the top-25 DC recordkeepers by 2016 “record-kept assets,” approximately 68 percent offer a proprietary target-date fund compared to just over 28 percent offering a proprietary managed account service.
“While recordkeeping is sometimes referred to as a commoditized business, it clearly creates opportunity for higher-margin asset management opportunities, such as proprietary target-date or managed account solutions,” Sclafani concluded.
Jessa Claeys is a writer, editor and graphic designer.
