While managed accounts offer a more personalized retirement planning solution than target date funds (TDFs), their effectiveness is hampered by insufficient data and participant engagement. In theory, managed accounts can provide tailored investment strategies that adjust to the unique financial situations and retirement goals of individual participants. However, without robust data about each participant’s financial circumstances, preferences, and behaviors, these accounts cannot fully achieve their potential. This lack of comprehensive data means that managed accounts often end up functioning similarly to more generic investment options like TDFs, albeit at a higher cost.
To maximize the potential of managed accounts, advisors need to actively leverage these tools to personalize investments and enhance participant interactions. This involves collecting and utilizing detailed financial data to create tailored investment strategies for each participant. Regular check-ins and personalized advice sessions can help advisors understand changes in participants’ financial situations and adjust their strategies accordingly. By fostering more frequent and meaningful interactions with participants, advisors can build trust and ensure that the managed accounts are truly reflective of each individual’s needs and goals. This approach not only improves investment outcomes but also encourages greater participant engagement, leading to a more successful and satisfactory retirement planning experience.
Fred Barstein delves more deeply into this topic in his latest Wealth Management article titled, “The Future of 401(k) Managed Accounts.“
