Understanding managed accounts

Managed accounts offer employees access to personalized, unbiased savings and investment recommendations based on an individual’s financial goals and other factors such as retirement age and risk tolerance. And, with the movement to more personalized, holistic benefits, managed accounts are becoming an increasingly popular option for defined contribution retirement plans.1

We have seen a 47% increase over five years (12/31/17 vs. 12/31/12) in the number of plans that offers our Advice Access service, which includes a managed account solution, PersonalManager®.2

Managed accounts can often take into consideration other participant data, including assets held outside the retirement plan, to help formulate a comprehensive strategy. Recommendations can include contribution rate, asset allocation and specific investment options, and portfolios may be dynamically managed, rebalanced and/or reallocated regularly.3 As a participant’s preferences or goals change over time, they can update their account data.

The potential benefits of managed accounts

A study from Morningstar Investment Management showed that younger and lower income participants tended to increase retirement savings rates the most after receiving guidance.4 Another study showed individuals who were defaulted into managed accounts saved 2% on average more than those who were defaulted into target-date funds.5

If you are thinking about adding a managed account solution to your plan, you might also want to consider that a managed account may serve as a qualified default investment alternative (QDIA). This approach can help take the guesswork out of investment decisions for employees who often feel overwhelmed and undereducated when it comes to selecting 401(k) investment options. A QDIA may also provide greater fiduciary protection for your company.

Before implementing a managed accounts program, explore if it is an appropriate solution for your company by reviewing plan design, fees, features, data, investments and asset allocation approach. For more information about Bank of America Merrill Lynch’s Advice Access, download the fact sheet and talk with your Bank of America Merrill Lynch representative about making this service available for your workforce.

1 Source: An Employer's Guide to Managed Accounts, Morningstar, 2018.

2 Source: Bank of America Merrill Lynch recordkept plans offering Advice Access, which includes a managed account solution, PersonalManager®, 12/31/17 vs. 12/31/12.

3 Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss.

4 Blanchett, David. 2014. “The Impact of Expert Guidance on Participant Savings and Investment Behaviors.” White Paper.

5 Blanchett, David, Dan Bruns, and Nathan Voris. 2016. “The Impact of the Default Investment Decision on Participant Deferral Rates: Managed Accounts vs. Target-Date Funds.” White Paper.

The Advice Access service uses a probabilistic approach to determine the likelihood that participants in the service may be able to achieve their stated goal and/or to identify a potential wealth outcome that could be realized. Additionally, the recommendations provided by Advice Access may include a higher level of investment risk than a participant may be personally comfortable with. Participants are strongly advised to consider their personal goals, overall risk tolerance, and retirement horizon before accepting any recommendations made by Advice Access. Participants should carefully review the explanation of the methodology used, including key assumptions and limitations, which is provided in the Advice Access disclosure statement. It can be obtained through Benefits OnLine® or through your representative.

IMPORTANT: The projections or other information shown in the Advice Access service regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.