Advisors invited to attend a conference presented by LeafHouse and iJoin on Tuesday in Austin, Texas, got a crash course on why increased personalization is trending in the retirement industry, and how advisor managed accounts are increasingly being used to deliver it for participants.
The conference was squarely focused on how retirement advisors can grow their business by bringing personalization to the masses with Advisor Managed Accounts Platform (MAPs)—and specifically about the ins and outs of the new LeafHouse-iJoin MAP.
LeafHouse Financial and iJoin introduced their advisor managed account offering last August, combining the power of LeafHouses’ FlexFiduciary and reallocateIT portfolio management technologies and iJoin’s goal-based, personalized participant experience. The technology-driven efficiency of the solution makes it possible to offer a personalized managed account program with 3(38) investment manager fiduciary coverage at a cost of as little as six basis points (not including investment expense).
“Our partnership with iJoin reflects our core focus of innovating with cost effective and scalable solutions,” LeafHouse CEO Todd Kading said at the time. “This offering has the potential to benefit millions of investors by optimizing their savings path while helping employers reduce their retirement plan costs and fiduciary burden.”
MAPs—which provide personalized investment recommendations for 401k participants based on known data points provided by the recordkeeper, plan sponsor or the participant themselves—have seen rising interest and decreasing costs as technologies have evolved and data points have become more readily available.
Evolving technology has enabled the automatization of many of the processes as well, which can allow even a managed account a achieve a level of “set it and forget it” usually reserved for target-date funds. TDFs have become so similar and “bunched up” that there is now a big opportunity to outperform them with managed accounts.
And LeafHouse’s Kading, a former 401k Specialist Top Advisor by Participant Outcomes honoree, told conference attendees Tuesday they should take this opportunity and run with it.
“Why are you as advisors and recordkeepers allowing the target-date companies to make all the money?” Kading said. “This solution allows you to lower the cost for the participant, personalize and make a little bit of money for yourself. And there is nothing wrong with that.”
Kading said the Leafhouse iJoin Solution costs 20 basis points (bps) plus fund expenses (technology and recordkeeper average 15 bps, plus 5 bps advisor fee for AMA), while other managed accounts charge 50 bps plus fund expenses.
“I’ve heard this many times: Personalization by its very nature must be more expensive. That’s absolutely incorrect.”
LeafHouse CEO Todd Kading
“I’ve heard this many times: Personalization by its very nature must be more expensive. That’s absolutely incorrect,” Kading said. “It’s doable because of the technology.”
While managed accounts are not new, the way they are being brought to market right now brings some newness. The message Kading stressed to advisors? Target-date funds are fine and they aren’t going away, but there’s more to retirement plans than TDFs—and participants deserve personalization.
“Why would you want to have a static portfolio when you can have it tailored? And if it’s this inexpensive to personalize, why wouldn’t you?” he asked.
A dozen recordkeepers have already adopted the Leafhouse-iJoin MAP, Kading said.
The will to pursue personalization is what this industry really needs, iJoin CEO Steve McCoy said during a session devoted to the topic during the conference, because personalization is what today’s participants—younger ones in particular—expect. After all, people are unique. Their portfolios should be as well. A “a plan in a can” isn’t enough anymore. Participants want customization.
The industry is starting to have the will to do the work, McCoy said, noting that advisors have traditionally thought that managed accounts are just too expensive. “That needs to change. It is changing,” McCoy said.
While Personalization 1.0 elevated expectations (and increased the average participant deferral rate by 1.8% for those using iJoin), McCoy said ‘Personalization 2.0’ incorporates a goals-based user experience with dynamic risk assessment aligned with optimized portfolio management for each saver.
“We believe the industry is changing. Personalization is a megatrend that everyone needs to be paying attention to,” McCoy said.
SEE ALSO:
• LeafHouse Leadership Change Puts Kading in Command
• Big Data, Big Tech, Big Ideas Focus of LeafHouse Financial Event