Edelman Financial Engines (EFE), America’s top independent wealth planning1 and workplace2 investment advisory firm, released a ground-breaking report that features data and insights gained from 20 years of helping employees save for retirement through its industry-leading managed account program.3
For two decades, EFE has been at the forefront of providing managed account services to employer-sponsored retirement plans. The program offers a solution for employees who want professional support and a more personalized approach to managing their retirement plan investments, along with unconflicted financial planning and advice from an independent advisor. The report, Igniting Growth Through Innovation, is a first-of-its-kind analysis of data that spans more than a million program members across different ages and career stages, the largest employers across industries, and the leading retirement plan recordkeepers.4
“Once known simply as a 401(k)-asset allocator to improve retirement readiness, the managed account has evolved into a robust financial planning platform that has changed how millions of individuals receive professional financial help,” said Kelly O’Donnell, President, Employer Solutions, at Edelman Financial Engines. “The steady growth of managed account services and the continued demand we’ve seen from employers and employees over the past two decades reinforces the importance of high-touch financial advice and planning solutions within the workplace.”
With 45% market share2 and over $221 billion in assets under management, EFE is the largest provider of professionally managed accounts in the industry, serving 1.2 million program members across nearly 700 employers and a majority of the largest plan recordkeeping platforms.4
Redefining Participant Success Beyond the Traditional Measures
A key takeaway from the report is that managed accounts are driving value for program members that extends far beyond providing help with asset allocation decisions. This can be seen through some of the positive trends in behaviors and outcomes from their use. For example, managed account members are contributing an average of 9.1% of their income to their retirement account, compared to 7.8% for non-members and 7.4% for individuals primarily invested in a single target date fund (TDF). Also, nearly half of managed accounts members are 50 years of age or older (47%) compared to just 29% of primary TDF users, reinforcing that employees need and want a more customized approach to their planning and investment strategy as retirement nears.
The data also shows a rise in the number of people taking advantage of the ability to personalize their investment strategy. During the last decade, as a way to address the increasing consumer demand for customized experiences, EFE added tools and options that provide a more comprehensive, tailored service such as enabling employees to add spousal information, estimated retirement expenses, and other sources of retirement income (pensions, spousal pensions, IRAs, etc.). The experience also includes interactive online levers to see in real-time how changes in contributions or retirement age might impact projected income goals. As a result of this, the number of members providing their personal data and preferences has double from 33% in 2014 to 74% in 2023. Greater personalization is critical for driving engagement and enhancing the success of managed account programs, as this can help create an advice experience that is geared more closely to a client’s needs and goals.
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