Managed accounts are experiencing increased demand and appreciation, according to research by Fidelity which looked at how employers and employees viewed and engaged professional help for their retirement plans.
The study found that employers see managed accounts as a valuable workplace benefit and that workers’ interest is piquing as they seek professional guidance in the midst of ongoing market instability.
Employers view managed accounts as a good attraction and retention tool, with more than half (51 per cent) citing the offering as a way to retain employees, and 49 per cent saying the service helps to attract the best employees.
In addition, almost two-thirds (57 per cent) of companies said that workplace managed accounts were “very important” to help employees prepare for retirement, while 53 per cent said the service ensures employees are investing their retirement savings appropriately.
When exploring the value of managed accounts with workers, Fidelity found that to know managed accounts is to love them. About half (48 per cent) of managed account users said that the ongoing monitoring of their investments was one of the most valuable things about the offering. Forty-four per cent the said that the annual review was essential and 38 per cent said that ongoing management was beneficial, as well.
However, employees who didn’t have a managed account were less likely to value them as a result of not understanding the offering or the benefit. Thirty-nine per cent of employees who did not have a managed account said they lack understanding of what is being offered, and one-quarter (25 per cent) said that not knowing enough about them is a major barrier to adoption.
But when those same employees were walked through what a managed account is and how it offers ongoing professional management of their retirement accounts, over half (54 per cent) said that the concept was relevant to them, 52 per cent said they would find the service useful and 46 per cent said they would like to find out more.
In response, employers are recognising the need for increased employee education around “do it for me” solutions, such as target date funds and managed accounts. In fact, eighty per cent of Fidelity clients who adopt workplace managed accounts are using educational programs to help employees gain the knowledge they need.
“Employers are realising that education is a critical component in the managed account dialogue,” says Sangeeta Moorjani, senior vice president of Fidelity’s Professional Services Group. “Employees seek professional guidance to help them navigate the uncertainty in the markets. Workplace managed accounts serve as a ‘shock absorber’ to help cushion investors from dramatic swings. Companies are providing the educational resources and direction needed to help employees recognize the value so they can take full advantage.”
Fidelity’s managed account offerings experienced significant growth in the past year. Overall, the use of Fidelity’s professionally managed account portfolios — which include both workplace and retail — increased significantly and assets under management topped off at over USD212 billion in 2015.
Fidelity Portfolio Advisory Service at Work (PAS-W) – Fidelity’s proprietary managed account offering for workplace retirement accounts – also experienced significant demand.
Fidelity added 664 new plan sponsors to its PAS-W business for a total of 3,861 clients at the end of 2015, about 21 per cent growth over the prior year. Enrolled participants in the service grew 46 per cent in 2015 to just under 237,000 participants, and assets under management grew 34 per cent to about USD14.5 billion.
PAS-W is fully integrated into the overall Fidelity Workplace Participant offering so employees receive a consistent cross channel experience when saving, planning and investing for retirement, whether they choose to do it themselves or enrol in a professionally managed account. For more information on PAS-W, plan sponsors or consultants can contact their Fidelity representative.