Cogent Reports: Mega 401(k) Plans Triple Use of Managed Accounts

CAMBRIDGE, Mass.--(BUSINESS WIRE)-- Mega plan sponsors, which often serve as indicators of new industry trends, are pushing the envelope yet again, going beyond target date funds by offering more personalization to their plan participants through managed account vehicles. In fact, the proportion of Mega plans offering these customized allocation solutions as their 401(k) plan default investment option has increased from 5% in 2014 to 18% in 2015. These and other findings are included in the annual DC Investment Manager Brandscape™, a Cogent Reports study by Market Strategies International.

According to the report, Mega plans, defined as those managing $500 million or more in assets, report a strong interest in offering ETFs within managed accounts to their plan participants as a means of offering a cost-effective solution. Furthermore, these sponsors are significantly more likely to cite retirement income product offerings as a key reason for selecting a managed account provider.

“While target date funds continue to serve as the most widely preferred default investment option among most plans, this increased usage of managed accounts among Mega plans signals a growing desire in the industry to offer a more personalized solution for plan participants,” says Linda York, vice president of Cogent Reports. “This shift echoes the rise in popularity of these robo-advice retirement vehicles that are customized for each individual investor and highlights new opportunity for investment managers to secure a place on the investment lineups of these larger plans as managed account providers.”

The report identifies the top investment managers that plan sponsors would likely consider for managed accounts and target date funds as well as other investment products. Among the larger plan segments, eight firms rank in the top ten for both managed accounts and target date funds. Within this competitive set, Vanguard earns the greatest consideration potential as a target date fund provider, while Charles Schwab Investment Management claims the lead position for managed accounts.

“Plan sponsors of all asset sizes are looking for target date fund providers with a proven track record of strong investment performance with competitive fee structures, yet the aspects of fiduciary protection and retirement income offerings play a significant role in selection of managed account providers, particularly among Large and Mega plans,” says York. “From a competitive standpoint, we found that very few firms are able to distinguish themselves on these key attributes, and as such, a select few are setting themselves apart from the rest in a very crowded marketplace.”

Top 10 DC Investment Managers: Aided Consideration
(Among Mid-sized, Large and Mega plan sponsors)
Target Date Funds					Managed Accounts
1. Vanguard					1. Charles Schwab Investment Management
2. Wells Fargo					2. Goldman Sachs
3. John Hancock Funds					3. Fidelity Investments
4. J.P. Morgan Asset Management					4. BlackRock
5. Prudential Financial					5. Vanguard
6. Fidelity Investments					6. Wells Fargo
7. Putnam Investments					7. John Hancock Funds
8. Charles Schwab Investment Management					8. T. Rowe Price
9. T. Rowe Price					9. J.P. Morgan Asset Management
10. Franklin Templeton Investments					10. Prudential Financial

Source: Market Strategies International. Cogent Reports™. DC Investment Manager Brandscape™: March 2015.

About DC Investment Manager Brandscape

Cogent Reports conducted an online survey of a representative cross section of 620 plan sponsors from February 21 to March 6, 2015. Survey participants were required to play a direct role in evaluating and/or selecting investment managers/investment options for 401(k) plans within their organizations. In determining the sampling frame for this study, Cogent Reports relied upon the Standard & Poor’s Money Market Directories (MMD) and Judy Diamond databases. To ensure the population for this research was representative of the universe of 401(k) plan sponsors, strict quotas were set during the data collection phase around key firmographic variables, including total plan assets, number of plan participants, industry and geographic region. Minimal weighting was applied to adjust for purposeful deviations from the actual marketplace distribution. The data have a margin of error of ±3.94% at the 95% confidence level. Market Strategies will supply the exact wording of any survey questions upon request.

About Market Strategies International

Market Strategies International is a market research consultancy with deep expertise in consumer/retail, energy, financial services, healthcare, technology and telecommunications. The firm is ISO 20252 certified, reflecting its commitment to providing intelligent research, designed to the highest levels of accuracy, with meaningful results that help companies make confident business decisions.

Market Strategies conducts qualitative and quantitative research in 75 countries, and its specialties include brand, communications, CX, product development, segmentation and syndicated. Its syndicated products, known as Cogent Reports, help clients understand the market environment, explore industry trends and monitor their brand and products within the competitive landscape. Founded in 1989, Market Strategies is one of the largest market research firms in the world, with offices in the US, Canada and China. Read Market Strategies’ blog at FreshMR, and follow us on Facebook, Twitter and LinkedIn.

Market Strategies International
Anne Fallon, 617.715.7611
[email protected]

Source: Market Strategies International

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