Managed Accounts: Personalized Investment for Better Retirement Outcomes

When it comes to retirement planning, one size doesn't fit all. That's where managed accounts come into play, offering a tailored investment solution that aligns with an individual's unique financial goals, risk tolerance, and life situation. Managed accounts differ from more generalized investment options, such as target-date funds or mutual funds, by providing a personalized approach to asset management [1].

At the core of a managed account is the professional management team responsible for making investment decisions on behalf of the account holder. These managers continuously assess the market and adjust the portfolio as needed, aiming to optimize returns while keeping the individual's objectives in mind [2]. This dynamic approach contrasts sharply with more static investment options, which follow a predetermined path regardless of changes in the account holder's circumstances or market conditions.

"Managed accounts offer a clearer understanding of fiduciary protection and obligation by plan fiduciaries, including sponsors and their advisors. In recent years, various ERISA litigations have clarified fiduciary responsibilities, obligations, and standards." - Retirement Advisor [2]

Managed accounts are particularly appealing for those who prefer a hands-off approach to investing but still want a strategy that's specifically designed for them. Instead of having to choose from a limited range of investment options or constantly monitor and rebalance their portfolio, participants in managed accounts can rely on the expertise of professional managers [3]. These managers not only consider the account holder's current financial situation but also their long-term goals, such as retirement needs, tax considerations, and any other financial obligations.

One of the significant advantages of managed accounts is the level of customization they offer. Unlike target-date funds, which adjust based on a fixed retirement date, or index funds, which simply track a market index, managed accounts are flexible. They can be tailored to account for a range of factors, including an individual's risk tolerance, investment horizon, and any specific preferences or restrictions they may have [4]. This flexibility allows for a more nuanced and effective investment strategy, potentially leading to better retirement outcomes.

However, this personalized service often comes with higher fees compared to more passive investment options. The costs associated with managed accounts typically cover the professional management and any administrative services provided [5]. While some may view these fees as a drawback, it's important to consider the value of having a portfolio that's actively managed and customized to your unique needs. For many, the potential for improved returns and the peace of mind that comes with professional management outweigh the additional costs.

"Costs of managed accounts are lower now, in part because of the use of technology. The ability to access and apply data through automation makes the managed account process more streamlined and more time-efficient on the part of an advisor as well as the managed account provider, resulting in lower and more reasonable costs." - Retirement Advisor [2]

In an employer-sponsored retirement plan, offering managed accounts as an option can be a powerful way to help employees achieve their retirement goals. It allows plan sponsors to provide a more diversified and personalized investment option, catering to the varying needs of their workforce [1]. For employees who may not have the time, interest, or expertise to manage their retirement savings, a managed account offers a way to ensure their investments are aligned with their long-term financial objectives.

In conclusion, managed accounts offer a compelling alternative to more traditional investment options, particularly for those looking for a personalized approach to their retirement planning. By leveraging professional management and a customized investment strategy, managed accounts can help individuals better navigate the complexities of investing, ultimately leading to more secure and prosperous retirement outcomes [5].

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References:

[1] BlackRock. (n.d.). What is a Target Date Fund (TDF) – Retirement. Retrieved from https://www.blackrock.com/us/individual/education/retirement/what-is-a-target-date-fund

 [2] Retirement Advisor. (n.d.). Time to Take a Closer Look at Managed Accounts. Retrieved from https://www.retirementadvisor.us/index.php/viewpoint/time-to-take-a-closer-look-at-managed-accounts

 [3] Principal. (n.d.). Managed account solutions for retirement plans. Retrieved from https://advisors.principal.com/wps/portal/advisor/products/retirement-plans/investment-choices/asset-allocation-choices-managed-accounts

 [4] PLANSPONSOR. (2023, October 25). Managed Accounts Provide Personalized Investments but Some Sponsors Hesitant to Offer. Retrieved from https://www.plansponsor.com/managed-accounts-provide-personalized-investments-but-some-sponsors-hesitant-to-offer/

 [5] Qualified Plan Advisors. (n.d.). Advisor Managed Accounts. Retrieved from https://qualifiedplanadvisors.com/advisor-managed-accounts/

Citations:

 [1] https://www.lordabbett.com/en-us/financial-advisor/insights/retirement-planning/a-growing-trend-in-2022--managed-accounts-in-retirement-plans-b-.html

 [2] https://www.retirementadvisor.us/index.php/viewpoint/time-to-take-a-closer-look-at-managed-accounts

 [3] https://advisors.principal.com/wps/portal/advisor/products/retirement-plans/investment-choices/asset-allocation-choices-managed-accounts

 [4] https://www.plansponsor.com/managed-accounts-provide-personalized-investments-but-some-sponsors-hesitant-to-offer/

 [5] https://qualifiedplanadvisors.com/advisor-managed-accounts/