PLANSPONSOR - February/March 2018 - 11

Fiduciary
Concerns
When
Debating
Managed
Accounts
THE chief benefit of managed accounts
is their capacity for customization and
personalization, making them an attractive
option for employees seeking to build
their retirement portfolio based on their
own situation. Yet, this plus can be one
of several minuses for plan fiduciaries
tasked with trying to help participants
achieve optimum saving results.
One well-publicized minus of these
accounts is high fees. In terms of both
plan and participant fees, sponsors must
ensure reasonable costs relative to services
rendered, stresses Cammack Retirement
in a recent report.
Todd Lacey, chief business development
officer at Stadion Money
Management, explains how rapidly fees
associated with managed accounts can
climb. " Sometimes it comes from how
they're built, " he says. When managed
account services are applied to funds in
the investment lineup-for which fees
are already being charged-this adds
further fees, he explains. " That can add
up pretty quickly. "
Because of the fees, Mike Volo, senior
partner at Cammack, suggests offering a
managed account as a choice, not as the
qualified default investment alternative
(QDIA). Better for the QDIA would be a
target-date fund (TDF)-an investment
alternative with minimal personalization
but a lower cost. Then, should a
participant choose to enroll in a managed
account, his assets can be moved over.
" An emerging solution is to default
participants into a target-date fund,
and then, based upon a trigger-either
account balance or age-the TDF is
transferred to a managed account, " he
says. He believes that will increase the
accounts' utilization.
Meanwhile, recordkeepers often offer
few, if any, managed account options,
Lacey says.
Either way, after plan sponsors
reckon with any such limitations, Lacey
says, employers should explore logistics,
including investments, costs and more.
" They'd want to look at underlying investments
used-are they the plan funds or
are there other investments? What's the
cost, and what's the participant experience
associated with that managed account? "
According to the Cammack report,
plan sponsors will also need to determine
whether there are enough of both
active and passive funds in the current
TALKING POINTS
Changing the Company
Match This Year
What steps will you take in the next 12 months with respect
to the company match?*
Don't know
59.1%
Increase it
Restructure it
Reinstate it
Change it to a stretch match
Change the timing
Add a match true-up feature
27.3%
22.7%
4.5%
4.5%
4.5%
4.5%
*Percentages are out of 152 DC plan sponsors that responded to Callan's 2018 Defined
Contribution Trends survey; multiple responses were allowed.
investment offerings. Otherwise, " an
investment lineup would require an
overhaul before the addition of managed
accounts can be considered, " it says.
Due to the increased customization
found in managed accounts, which factor
in age, marital status, risk, other assets,
etc., performance reporting and benchmarking
are difficult-another of the strategy's
minuses. Whereas TDFs and mutual
funds can apply a standard benchmark,
the uniqueness of each managed account
makes comparison tough, the report notes.
Data helpful for performing due
diligence is often available through the
managed account provider, Volo says.
Although the idea of managed
accounts clicks with advisers and recordkeepers,
participants have yet to engage.
Volo partially blames information overload.
Lacey recommends integrating technology,
providing one-on-one help and,
when information is conveyed, keeping it
clear. -Amanda Umpierrez
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