Fidelity adds more financial planning to its 401(k) managed accounts

Advisers delivering financial wellness programs to 401(k) plans should take note, observers say

Jul 17, 2018 @ 2:24 pm

By Greg Iacurci

Fidelity Investments, the largest record keeper of defined-contribution plans, has upgraded its managed account service to encompass more holistic financial planning and advice for 401(k) investors. Observers say the move signals a trend that's likely to accelerate among other providers and that may concern retirement plan advisers who fear that Fidelity is competing with them on participant services.

Fidelity's new managed account offering — Personalized Planning & Advice, which launched Tuesday — helps plan participants set financial goals and priorities, like paying down student debt and establishing an emergency fund.

The program offers participants an asset allocation that's based on their financial plan and delivers follow-up correspondence, on at least a quarterly basis, to make sure participants are on track to meet their goals.

This approach differs from the previous iteration of Fidelity's managed account — branded as Portfolio Advisory Service at Work, or PAS-W — which factored more basic information, such as risk tolerance and investment preference, into an investor's asset allocation without considering broader financial goals or providing regular check-ins.

"We're really doubling down on the financial plan," said Sangeeta Moorjani, head of product, marketing and advice for Fidelity's Workplace Investing group.

More than 5,300 retirement-plan clients offered Fidelity's managed accounts to participants as of last quarter, and more than 426,000 participants were enrolled. The upgrade comes at no additional cost for users.

A team of Fidelity representatives, registered with Finra Series 7 and/or 66 licenses, can help with the financial plan and quarterly reviews.

Fidelity's approach toward holistic financial planning is in line with a transformation that's been occurring in the wealth management and advice industry more generally. Some 401(k) managed account providers, including Financial Engines, the largest player, in recent years have introduced full-blown financial planning services to participants through financial advisers.

"I think right now it's a huge differentiator, being able to offer that level of support to a large number of people economically," said Louis Harvey, president and CEO of Dalbar Inc. "It certainly enhances the standard of care the participant gets."

Some retirement plan advisers, like Barbara Delaney, founder and principal at StoneStreet Advisor Group, say Fidelity's move could offer competition to advisers offering things like financial wellness programs, student loan debt management and credit counseling to participants.

"Record keepers are trying tp gather assets and be in control of the employee experience," Ms. Delaney said. "It should be a concern for advisers who are actively engaging through participant programs."

A little over a year ago, Fidelity made other changes involving its managed account service. Following on Empower Retirement's launch of a service that automatically transitions participants from a target-date fund to a managed account after certain triggering events, Fidelity debuted a similar service, called Smart QDIA.

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