PLANSPONSOR - August/September 2018 - 44

3) For participants invested in them, managed accounts
should act as a 3(38) fiduciary-i.e., having discretionary control
over trade execution. Advice-based products that offer a wide
range of tools and account monitoring services-and may even
make recommendations for the participant-are not considered
managed accounts, even if the recommendations can be implemented
in a single click.
For the more traditional managed account providers, much of
their development over the last few years has focused on improving
the personalization of asset allocation for participants-especially
if the participants neglect to engage with the managed account
solution. The process of assessing participant risk tolerance is not
standardized, nor is there a standard for which data elements are
used in determining an asset allocation, O'Keefe says.
Providers leverage various data points: Some use what
is available in the recordkeeping system such as age, gender,
savings rate and income, while others employ data points accumulated
from the payroll system such as marital status and
dependents. While providers can determine a custom allocation
without the engagement of the participant, some providers also
allow for participants to enhance the information, by adding
details about outside assets, for example.
Some providers of managed accounts and model portfolios
leverage questionnaires that participants need to complete, which
are usually designed to direct the person into a particular asset
allocation " sleeve, " O'Keefe says. The number of sleeves can sometimes
give plan sponsors a sense of how custom the allocations
will get-i.e., whether a participant will be slotted into one of say,
five, risk-based pools, or whether the allocation will be individualized
based on the data points referenced above.
Plan sponsors considering managed accounts should look
under the hood of the program to understand the differences. It
may be hard to compare methodologies' advantages, but differentiation
does exist in some quantifiable areas, such as how each
product handles company stock or retirement income creation,
whether participants have access to licensed representatives or
advisers, and what fees the provider charges, O'Keefe says.
Although the growth in managed account assets has trailed
asset growth in TDFs, O'Keefe says, interest in the accounts is
clearly increasing, as experience and research suggest they may be
the better solution when participants reach a certain level of retirement
savings or their financial situation becomes complex. -PS
2018 PLANSPONSOR Managed Account Buyer's Guide
Industry Snapshot
Total Managed Account
Assets ($mm)
Total Managed Account
Plans
Total Managed Account
Participants
Total Managed Account
Assets, by Service Model
Direct/Outsourced
relationships
$90,000
55%
45%
2011
2015
2018
2011
2015
2018
2011
2015
2018
Sub-advised
relationships
Percentage of Total Managed Account Participants, by Length of Relationship
3% 4% 7%
6% 13%
67%
44 PLANSPONSOR.com August-September 2018
<6 months
6 - 12 months
>1 - 2 years
>2 - 3 years
>3 - 5 years
>5 years
100,156
133,948
145,107
$156,220
$274,628
1,668,957
2,334,625
2,986,927
http://www.plansponsordigital.com/plansponsor/august-september_2018/TrackLink.action?pageName=44&exitLink=http%3A%2F%2FPLANSPONSOR.com
PLANSPONSOR - August/September 2018

Table of Contents for the Digital Edition of PLANSPONSOR - August/September 2018
