What’s the size of the defined contribution market opportunity for managed accounts? How are relationships between managed account providers and recordkeepers structured? What is the target-date fund community’s perception of managed accounts—are they to be feared or emulated?
These are some of the questions asked and answered in a new report from global research and consulting firm Cerulli Associates on managed accounts in defined contribution plans.
“The managed account category within DC plans exhibited robust growth in recent years, with total assets more than doubling, from $108 billion in 2012 to $271.3 billion in 2017,” Jessica Sclafani, director at Cerulli, said in a statement.
DC managed account assets expanded at a five-year compound annual growth rate (CAGR) of 20 percent from 2012 through 2017, while the overall DC market experienced a CAGR of nearly 9 percent for the same period.
“Cerulli anticipates DC managed accounts will continue to exhibit organic growth, while the corporate DC market will largely rely on capital market returns to fuel asset expansion, Sclafani added. “With the broader DC market facing negative net flows, this makes the managed account category attractive,”. In 2017, DC managed account assets represented 3.6% of the total $7.6 trillion DC market.
Looking forward, Cerulli believes managed accounts may increase their prevalence in DC plans, but it will primarily be in a non-qualified default investment alternative (QDIA) capacity.
Cerulli sees specific opportunity for managed accounts to increase their penetration with existing DC plan clients, through targeted campaigns to specific cohorts of participants, with emphasis on their position as a holistic solution with access to advice, according to the company.
“Managed accounts are in line with many of the most pervasive and influential trends shaping the DC market—particularly financial wellness,” Sclafani concluded. “The increasing interest among 401(k) plan sponsors in encouraging and promoting financial wellness aligns with the more individualized and holistic mandate of a managed account.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
