Using Employee Data to Select an Optimal Default: Where Can Managed Accounts Fit?

Plan sponsors have the responsibility to select a default investment solution that meets the needs of their diverse workforce. Meeting individual retirement needs can be a challenging proposition, but with a managed account option, employees can access personalized, and professionally-managed investment advice as well as tailored savings and retirement age advice. Although a managed accounts service can be an optimal solution for helping many employees reach their retirement goals, plan sponsors often struggle to justify the additional cost associated with the service. Morningstar Investment Management LLC has recently developed a framework that leverages employee and plan data to quantitatively determine the value of managed accounts for a specific plan.