Made to measure: Evaluating the impact of a retirement managed account

Made to Measure: Evaluating the Impact of a Retirement Managed Account

Retirement managed accounts need a clearer definition and better benchmarks to convey their value.

Many defined contribution plans today offer a managed account option. To date, however, there is no standard method for valuing these accounts that considers the full range of potential product features and their financial impact. Retirement managed account (RMA) services can be more complex than certain traditional professionally managed investment products such as balanced funds or target date funds. As a result, measuring their value is an equally complex process.

To solve this issue, Empower has developed a formal definition of an RMA and created a framework to help consultants, advisors and plan fiduciaries evaluate the value of such a service.

 

Key findings

  • Historical performance is probably not the most appropriate way to account for the overall value of RMAs.
  • RMAs offer more personalized investment management, financial planning and opportunities to mitigate negative behavioral tendencies than target date or balanced funds.
  • Recordkeepers and RMA providers can facilitate value estimates by clearly articulating the features in their RMA products and providing plan-level analytics.

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