Managed Accounts Lag as QDIA Option, but Opportunity Still Exists

However, as asset managers educate advisers and investors on the benefits of managed accounts and professional advice, Cerulli Associates sees increased opportunity for DC managed accounts. Cerulli expects opportunities for asset managers in this arena to persist, as the market chaos in 2008 has renewed the hunger for professional advice among investors.  

The September issue of The Cerulli Edge: U.S. Asset Management Edition points out that managed account providers struggle with increasing participant adoption rates, which range from 8%-10% across plan assets. Cerulli contends that managed account providers must offer education and marketing services for plan providers and financial advisers to raise awareness of the benefits of managed accounts.  

Once a plan sponsors buys into the value of offering a managed accounts option within their DC plan, the more difficult task of educating participants begins. An executive interviewed by Cerulli stated that “getting plan sponsors to buy in is easier than getting participants engaged.”   

According to the report, educating participants on the value of managed account programs requires a coordinated effort between providers and their distribution partners (mutual fund and insurance companies), and when implemented successfully, leads to higher participant adoption rates. While the level of detail and coordination offered for participant-level education varies by a managed account provider’s scale for distribution, participant education generally revolves around welcome kits, marketing collateral, and enrollment meetings.  

Cerulli said in the quest to gather assets in DC managed accounts, it’s not only important for asset managers to understand (and participate in) the education process but also to build a detailed knowledge of a provider’s investment platform and due diligence process.