Model Portfolio & SMA Strategists Showcase - Flipbook - Page 39
SMAs & MODEL PORTFOLIOS
Retirement Plans & Managed Accounts
E
verything so far in this guide has
focused on taxable, advisormanaged relationships. This
chapter turns to a different, and
rapidly growing, context for managed
accounts: the tax-advantaged
retirement plan, where the “client” is
often a plan sponsor making a decision
on behalf of hundreds or thousands
of participants who may never speak
directly with an advisor at all.
WHY MANAGED ACCOUNTS
ARE GAINING GROUND INSIDE
RETIREMENT PLANS
Target-date funds became the default
investment option in most defined
contribution plans for good reason.
They’re simple, diversified, and
require no ongoing decision-making
from participants. But a targetdate fund’s glide path is built for an
average participant at a given age,
not for any specific participant’s actual
savings rate, outside assets, spouse’s
retirement accounts, or risk tolerance.
A managed account inside a retirement
plan attempts to close that gap.
It’s worth understanding the regulatory
vocabulary here specifically, since
BY THE NUMBERS
45% and climbing, but
not evenly
Forty-five percent of all defined
contribution plans offer a managed
account service, but 82% of plans with
5,000-plus participants do. Plan size is one
of the strongest predictors of whether this
benefit exists at all, which matters directly
for advisors serving smaller-plan sponsors.
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it shapes what a plan sponsor can
and can’t do without additional
participant consent. A Qualified
Default Investment Alternative, or
QDIA, is the specific legal category
the Department of Labor created
for investment options, target-date
funds chief among them, that a plan
sponsor can automatically enroll a
participant into without that participant
having made an affirmative investment
election, while still satisfying fiduciary
protections under ERISA. Managed
accounts can also qualify as a QDIA
under the right conditions, which
matters directly for plan sponsors.
Offering a managed account only as
an opt-in alternative reaches far fewer
participants than offering it as the
plan’s actual default, and the QDIA
distinction is often the deciding factor
