401(k) managed accounts have come into their own

401(k) managed accounts have come into their own
20 years of data show personalization benefits of managed account adoption, and opportunities for advisors to make an impact.
JUN 06, 2024

Edelman Financial Engines, a leading independent wealth planning and workplace investment advisory firm managing more than $221 billion in assets for 1.2 million program members, has published new research highlighting the benefits of 401(k) managed accounts in supporting workers’ retirement readiness.

Drawing on 20 years of 401(k) managed account data, the report titled “Igniting Growth Through Innovation” offers insights into the evolution and impact of managed accounts on employees' retirement savings.

“Once known simply as a 401(k)-asset allocator to improve retirement readiness, the managed account has evolved into a robust financial planning platform that has changed how millions of individuals receive professional financial help,” Kelly O'Donnell, president of employer solutions at Edelman Financial Engines said in a statement.

The report reveals that the percentage of 401(k) plan members sharing personal data and goals has doubled in the last decade, allowing for a more tailored experience that better meets individual needs.

EFE’s analysis found managed account members contribute an average of 9.1 percent of their income to their retirement accounts, compared to 7.8 percent for non-members and 7.4 percent for individuals invested primarily in target date funds.

A large 47 percent plurality of managed account members are 50 years or older, compared to 29 percent of primary TDF users, underscoring the need for a customized approach to retirement planning as employees approach retirement age.

Within its own group retirement enterprise, EFE introduced tools that allow members to add spousal information, estimated retirement expenses, and other sources of retirement income. These enhancements have led to a significant increase in personalization, with 74 percent of members now providing personal data and preferences, up from 33 percent in 2014.

The report also highlighted several behavioral insights and findings on outcomes for managed account members. Encouragingly, 74 percent of program users increased their savings rate within a year of enrollment, including 41 percent who saved over 10 percent of their income.

Additionally, 97 percent of managed account members are appropriately invested based on their personal goals and risks, a stark contrast to just 25 percent of non-users. Nearly all managed account members also hold less than 20 percent of their assets in company stock, whereas 40 percent of non-members hold more than 20 percent of their assets in company stock, posing a risk to proper diversification.

The report also emphasizes the value of advisor access, with 85 percent of members saying conversations with advisors during market volatility prevented them from making rash decisions. Retirement planning and retirement income remain the top topics discussed with advisors, particularly as employees transition into retirement.

“The steady growth of managed account services and the continued demand we’ve seen from employers and employees over the past two decades reinforces the importance of high-touch financial advice and planning solutions within the workplace,” O’Donnell said.

Latest News

Judge OKs more than $90 million in settlement money for GWG investors
Judge OKs more than $90 million in settlement money for GWG investors

Mayer Brown, GWG's law firm, agreed to pay $30 million to resolve conflict of interest claims.

Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs
Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs

Orion adds new model portfolios and SMAs under expanded JPMorgan tie-up, while eMoney boosts its planning software capabilities.

Retirement uncertainty cuts across generations: Transamerica
Retirement uncertainty cuts across generations: Transamerica

National survey of workers exposes widespread retirement planning challenges for Gen Z, Millennials, Gen X, and Boomers.

Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future
Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future

While the choice for advisors to "die at their desks" might been wise once upon a time, higher acquisition multiples and innovations in deal structures have created more immediate M&A opportunities.

Raymond James continues recruitment run with UBS, Morgan Stanley teams
Raymond James continues recruitment run with UBS, Morgan Stanley teams

A father-son pair has joined the firm's independent arm in Utah, while a quartet of planning advisors strengthen its employee channel in Louisiana.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave