NEPC’s research on managed account adoption trends is featured in this PLANADVISER article, highlighting how plan sponsors are increasingly exploring personalized financial advice solutions for participants. Visit PLANADVISER to read the full article or read excerpts below.
When offered, managed accounts can provide a full financial planning experience—from accumulation through retirement.
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Not everyone in the industry, though, subscribes to that sentiment. A February NEPC paper counters it, pointing out that high fees tend to erode the value of managed accounts, as a fee of 30 basis points typically requires a participant to increase his equity exposure by 20% to 30%, or by two to three TDF vintages, to achieve a similar net-of-fee return. Moreover, NEPC argued, participants paying the lower fee of 15 bps, for example, could anticipate returns comparable to a typical TDF investor. Nevertheless, despite the concern about fees, the NEPC paper says, “we believe managed accounts can deliver high quality and efficient investment portfolios for participants.”
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Still, the NEPC paper points out that fiduciaries have a responsibility to understand how asset allocation in managed accounts is determined. “The usage, application and magnitude of personalization factors increasingly hinge on the approach of each provider. Furthermore, most providers seem to rely heavily on a single factor that shapes much of their portfolio construction methodology.”
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