Managed Accounts Not Understood

Financial services providers and advisors may be losing some managed account business because participants in defined-contribution plans do not have a particularly good understanding of how these investments actually work.

Spectrem Group has found, for example, that a significant percentage of plan participants are unsure of the means of communicating with an advisor to set up their managed account and the availability of the advisor to answer questions, the two biggest influencers of their decision of whether to use a managed account.

After an initial meeting with the managed account advisor, most participants communicate with the advisor via telephone. In 83% of cases, the telephone is the preferred means of contact between participants and advisors, surpassing by far e-mail (9%) or other means of communication (8%).

Providers and advisors could further boost their managed account business by reaching out to participants who currently do not have access to a managed account in their plans.

Indeed, four out of 10 participants say they would be more likely to use a managed account in the future if their plans included a feature that would allow the advisor to manage other household investments. In this type of arrangement, participants would have the same type of access to information as they do in their defined-contribution plans.

This feature appeals most to the young, but even the oldest group of participants express interest. A number of households are looking for solutions for help with their household investments and the referral to an advisor through the managed account option is appealing to them.

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