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Where Do you Go for Financial Advice?
The rise of “automatic” asset-allocation solutions like target-date funds has not eliminated the need for personalized advice among 401(k) participants. In fact, the turmoil imposed on many retirement plan accounts by the financial crisis has, if anything, heightened interest in solutions that can provide participants with a more personalized approach—one that can take their tolerance for risk (or lack thereof) into account. Consider also that the Department of Labor’s qualified default investment alternative (QDIA) regulations specifically reference “an investment service that allocates contributions among existing plan options to provide an asset mix that takes into account the individual’s age or retirement date”—and then goes on to note that an example of such a service could be a professionally managed account. Of course, the relative simplicity and potential for greater personalization of these designs do not mean that your task in reviewing and evaluating these options as a plan fiduciary will be any less than you must apply to any other investment option on your menu. It does, however, have the potential to make those challenging decisions more manageable for your participants. This month’s Know How speaks to the question that might well be going through your participants’ minds: “What the heck is a managed account?” Whether you already have one in place or are merely considering it for your plan, we hope that this will give your participants some additional food for thought. As always, I look forward to your comments and suggestions.
The rise of “automatic” asset-allocation solutions like target-date funds has not eliminated the need for personalized advice among 401(k) participants. In fact, the turmoil imposed on many retirement plan accounts by the financial crisis has, if anything, heightened interest in solutions that can provide participants with a more personalized approach—one that can take their tolerance for risk (or lack thereof) into account.
Consider also that the Department of Labor’s qualified default investment alternative (QDIA) regulations specifically reference “an investment service that allocates contributions among existing plan options to provide an asset mix that takes into account the individual’s age or retirement date”—and then goes on to note that an example of such a service could be a professionally managed account.
Of course, the relative simplicity and potential for greater personalization of these designs do not mean that your task in reviewing and evaluating these options as a plan fiduciary will be any less than you must apply to any other investment option on your menu. It does, however, have the potential to make those challenging decisions more manageable for your participants.
This month’s Know How speaks to the question that might well be going through your participants’ minds: “What the heck is a managed account?” Whether you already have one in place or are merely considering it for your plan, we hope that this will give your participants some additional food for thought. As always, I look forward to your comments and suggestions.
Nevin E. Adamseditors@plansponsor.com