The keys to explaining the value of managed accounts

November 23, 2022

explaining value of a managed account

In general, customization is important, and the reason is quite simple: Not everyone is living the same life. All kinds of products can benefit from customization, and that includes retirement plans and other financial products and services. Managed accounts represent an ideal way for retirement plan participants to access more personalized service, with customization as a major focal point. 

As the American middle class in particular continues to lose confidence in their ability to enjoy a fulfilling retirement, they may be eager for new opportunities to set themselves up for financial success. Managed accounts could provide plan sponsors with an appealing option.

But how can plan sponsors and financial professionals send the right message and encourage participation? Here are a few keys to help explain why plan participants might be interested in managed accounts.

Managed accounts defined

A managed account is tailored to each individual participant and their retirement goals, often with service and support readily available. Whereas traditional accounts may treat all participants the same based on a single data point (an estimated retirement date or age range), a managed account is individually managed, taking into consideration multiple data points to create the participant’s own distinct investment portfolio.

People have different personal goals in their lives, even if they work for the same company in the same position. Younger adults may have different goals than their older coworkers and forcing everyone into a one-size-fits-all plan may only meet part of a person’s retirement and savings needs and cost them in the long run. It could also lead to apathy in participants, who may feel discouraged to take a more active role in saving up.

A managed account factors in and considers multiple factors, such as the plan participant’s age, existing 401(k) balance, outside assets, individual risk tolerance and at what age they expect to retire. An individual financial professional or a full team oversees the plan’s managed accounts, acting as fiduciaries in the participants’ best interest.

Communicating the benefits of managed accounts

One of the biggest advantages of a managed account is having a professional dig into participants’ best options based on their current circumstances and the market conditions. Financial professionals and plan sponsors are knee-deep in this world every day; that kind of investment guidance can help participants invest not only more effectively but also more confidently.

Many traditional accounts are relatively passive when they’re set up, and individuals could be missing out by not taking a more active role in the plan or choosing to have it managed by a professional. With a managed account, on the other hand, the professional assigned to the account is able to make adjustments as opportunities arise and conditions change—which may lead to better investment outcomes over the long term.

This kind of plan does come with an added cost, but when the potential benefits of a professionally researched and tailored plan is factored in, many plan sponsors find that participants see the value and decide the extra cost offers them greater financial potential.

Points to emphasize

Managed accounts…

  • Consider each individual’s retirement goals
  • Consider each individual’s current financial situation
  • Incorporate a participant’s risk tolerance
  • Enable access to a financial professional
  • Include expert guidance and service
  • Provide ongoing investment management
  • Encourage financial awareness
  • Let participants create a portfolio that’s important to them
  • Can help prevent emotionally charged investment mistakes
  • May pay out more than unmanaged accounts upon retirement

Many of these points go hand in hand. After all, the ultimate goal of a managed account is to provide the individual plan participant with a better retirement outcome to suit their personal circumstances.

Educate employers, employees and clients

Financial professionals and plan sponsors can offer educational material about the benefits of managed accounts discussed here. Even a simple infographic or brochure in print or email form can do the trick. Make it digestible and easy to understand, and put a major emphasis on tailoring each plan to the individual and why that can lead to a bigger payout over the long haul.

Encourage plan participants to stay in touch with the plan’s advisor and/or the appointed team overseeing the managed accounts with any questions or to make adjustments, and be as available as possible without overstepping boundaries. Send periodic emails or other reminders and encourage active participation as much as possible. Over-communicate, if need be!

Retirement solutions

Partner with Cuna Mutual Group and develop custom solutions that help achieve your goals and those of your clients and customers. We’re all about individualization when it comes to planning retirement, and we offer a variety of different plan types and investment options that provide simplified yet cohesive solutions.