Schwab Unveils New Managed Account Program

The program allows retirement plan advisers to build and manage customized investment portfolios for the plans they support.

Schwab Retirement Plan Services, Inc. has introduced a new managed account program for 401(k) plans.

Steve Anderson, executive vice president and head of Schwab Retirement Plan Services, tells PLANSPONSOR the Advisor Managed Account program leverages Morningstar managed account technology to build a series of customized investment portfolios for retirement plans with $20 million or more in assets and a dedicated retirement specialist adviser.

Retirement plan consultants who are registered investment advisers will now be able to build and manage customized investment portfolios for the plans they support, integrating recordkeeping services from Schwab Retirement Plan Services and managed account technology from Morningstar Associates, Anderson explains.

“Access to 401(k) advice is vitally important and adviser managed accounts can help more people receive that advice within their plan. Adviser managed accounts give employers and retirement plan consultants acting as investment advisers much more flexibility in designing investment advice programs to meet the specific needs of employees. This is the next logical step in the evolution of 401(k) plans,” Anderson says.

“We have seen that when advice is built into a 401(k) plan so that participants start off with it and are free to opt out, 87% remain in the advice program,” he adds. “With traditional managed accounts, where the participant has to search out the option and actively invest in the managed account, the uptake tends to be below 5%.”

NEXT: The participant experience

Under the terms of the program, advisers, in their fiduciary role as 3(38) investment managers, “can create up to 101 customized plan-level portfolios based on their investment and plan expertise,” Anderson explains. “They also determine the participant portfolio assignment methodology for each plan they serve.”

With this setup, Morningstar’s technology platform will analyze each participant’s individual information and, using the investment manager’s instructions, assign each participant a specific portfolio in real time created by the investment manager. Participant portfolio assignments typically will be based on 10 or more distinct data points including age, salary, savings rate and account balance. Portfolio assignments are evaluated on a quarterly basis through the technology platform and participants may have their portfolios rebalanced or adjusted as appropriate. 

This differs somewhat from a standard managed account, which instead sees changes made within a client portfolio, rather than having the client move between portfolios. However, like in a standard managed account, participants can share additional details about their financial situation, such as retirement assets outside the plan or a spouse’s retirement savings, to further refine their investment strategy. They can do so through an interactive website and over the phone with a Schwab advice associate who can help them input information online to generate the managed account recommendation.

Retirement plan consultants who want to learn more should call the Schwab Retirement Plan Services Consultant Support Center at 877-783-4372 or visit the consultant website.