The Impact of Managed Accounts on Participant Savings and Investment Decisions

A managed accounts service can help guide employees on how much save, how to invest their savings, and when to retire. In this paper, we explore the impact managed accounts can have on participants’ savings and investing habits based on whether they’re on track to meet their retirement goals and whether they built their own portfolios (or picked from portfolios already built) before entering a managed accounts service.

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Key Findings

  • 73% of participants studied were considered not on track for retirement
  • 65% of not-on-track participants increased their savings rate after enrolling 
  • 42% of on-track participants increased their savings rate after enrolling

  • Due to limitations on the audience investment advisers like Morningstar Investment Management LLC can provide hypothetical performance to, this paper is intended for Financial Professionals, Institutional Investors, and Sophisticated Plan Sponsors only. It may not be accessed by, shown to, shared with, or provided to any other person, including plan participants, plan sponsors that do not meet the definition of a "Sophisticated Plan Sponsor", retail investors, or the general public.

    The information contained in this document is the proprietary material of Morningstar Investment Management. Reproduction, transcription, or other use, by any means, in whole or in part, without the prior written consent of Morningstar Investment Management, is prohibited.

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    Definitions:

    Financial professionals are defined as any member of a securities-related self-regulated organization or registered person of such a member, including, but not limited to:

    • investment advisers,
    • members of
    • financial service providers and their employees, including, but not limited to, retirement plan recordkeepers.

    Institutional investors are defined as:

    • Any person described in FINRA Rule 4512(c):
    • Any governmental entity or subdivision thereof,
    • Any employee benefit plan, or multiple employee benefit plans offered to employees of the same employer, that meet the requirements of Section 403(b) or Section 457 of the Internal Revenue Code and in the aggregate have at least 100 participants, but does not include any participant of such plans,
    • Any qualified plan, as defined in Section 3(a)(12)(C) of the Exchange Act, or multiple qualified plans offered to employees of the same employer, that in the aggregate have at least 100 participants, but does not include any participant of such plans, and
    • Any person acting solely on behalf of any such institutional investor.

    A sophisticated plan sponsor includes sponsors of plans that fall under the definition of institutional investor plus:

    • Any employee benefit plan, multiple employee benefit plan offered to employees of the same employer, qualified plan, or multiple qualified plan offered to employees of the same employer with a knowledgeable person or persons who guides the decisions of the plan and who has access to the tools necessary to analyze hypothetical performance.

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    The information contained in this document is the proprietary material of Morningstar. Reproduction, transcription, or other use, by any means, in whole or in part, without the prior written consent of Morningstar, is prohibited. Opinions expressed are as of the current date; such opinions are subject to change without notice. Morningstar or its subsidiaries shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use.

    This commentary is for informational purposes only. The information, data, analyses, and opinions presented herein do not constitute investment advice, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. Please note that references to specific securities or other investment options within this piece should not be considered an offer (as defined by the Securities and Exchange Act) to purchase or sell that specific investment. The performance data shown represents past performance. Past performance does not guarantee future results. This commentary contains certain forward-looking statements. We use words such as “expects”, “anticipates”, “believes”, “estimates”, “forecasts”, and similar expressions to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or implied by those projected in the forward-looking statements for any reason.