Managed accounts can be an effective way for employers to offer more personalized retirement investment portfolios while amplifying their benefits offerings. Plan sponsors have been reluctant in recent years to add these offerings as part of their defined contribution (DC) plans, citing high fees and low return on investments as obstacles.

In this article, we make a case for why plan sponsors should give managed accounts another look and what they should consider when evaluating options. Plan sponsors currently using managed accounts should also evaluate their options. Not all providers are the same, and finding the right managed account vendor can help boost retirement savings among participants while ultimately serving as another enhancement to retain employees.

What are managed accounts in retirement plans?

Managed accounts are investment services that are overseen by a professional money manager or financial adviser. With respect to this article, we focus on managed accounts being offered as part of a defined contribution (DC) platform.

Managed accounts take the idea of target date funds a step further. Target date funds are mutual funds that are adjusted over time to reduce risk as the participant approaches retirement, while managed accounts offer a more personalized investment strategy. A managed account may have higher fees than target date funds, but they can offer the investor more value. A well-structured managed account can provide retirement advice at a lower cost than that of a financial planner, who can charge upwards of 1% or more of an investor’s assets annually.¹

As an offering in DC plans, managed accounts can make the platform offer more robust. Rather than just having a short lineup of target date funds and limited index fund choices, managed accounts give more options to participants by allowing for more selective investment choices.

Why DC plan participants should tap into the potential of managed accounts

For plan participants, managed accounts offer many advantages, including the following:

• Customization. Managed accounts help participants obtain a more appropriate asset allocation and investment mix based on their individual financial situation, risk tolerance, and retirement goals. The accounts incorporate additional data points, such as personal income, savings rates, outside assets, spousal income, and other retirement plans partnered with retirement goals and spending needs.
• More advice. With more data, providers can offer more targeted advice. Managed account advisors can recommend the appropriate savings rate as a guide for helping participants save appropriately in pre-retirement and plan for their replacement income during retirement. Maintaining advice service during retirement can assist with ensuring those savings last through retirement. Some managed account providers also offer point-in-time advice at no cost to the participant. Clearly communicating differences like this adds value to the participant’s experience. Driving the value of the managed account engagement and key features of managed accounts relies on a strong partnership between the plan sponsor and managed account provider.

Why does savings rate matter?

For example, someone saving 10% of a $50,000 salary over 35 years will retire with a final balance around $700,000, assuming a yearly return of 7%, with annual contributions. Yet increasing the savings rate turbocharges the ending balance at retirement: An individual saving 20% of a $50,000 salary over the same period with the same return rate would retire with almost $1.4 million.

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• Higher savings rates. In general, managed accounts have demonstrated the capacity to improve participant savings rates.² Participants considered to be off-track increased their savings rate by nearly 33%, an average of 2% of their salary. This dovetails with the desire of employers to offer ways to strengthen their employees’ financial outlook.
• More flexibility to make changes. When target date funds underperform, replacing them can be cumbersome, necessitating a full replacement of the target date fund suite. In contrast, managed accounts use the funds already available in a DC plan’s lineup. As decisions to remove, replace, or add funds to the lineup are made, the managed account service will also experience the same changes. Some managed account services regularly monitor and adjust participant portfolios as fund changes take place.
• Reaching underserved employees. By offering a managed account service to employees, an employer is offering greater access to financial advice to plan participants who traditionally may not have access to investment advisory services, due to income, account balance, or other limitations.³
• Differentiation. Offering managed accounts enhances a company’s total rewards package, helping employers better attract and retain employees.

Seven considerations surrounding retirement plan managed account services

While managed account services offer many benefits, the decision to offer the vehicle as part of a retirement plan is a fiduciary decision that requires due diligence and ongoing oversight. Whether you are considering expanding your 401(k) or 403(b) platform to include managed account services, or looking to review your current provider, here are some things to consider with managed account services:

1. Fees. Including a managed account service adds a second layer of expense on top of the existing investment fees.⁴ These fees are generally higher when compared to target date funds or fees paid by participants making their own elections. Yet for your participants, personalized advice may lead to better retirement outcomes which should more than offset the higher expense. Overall, it is key for plan sponsors to carefully review the additional features and benefits associated with the managed account service to determine if the additional fees and costs are reasonable. In addition, look for a provider that offers fee options, such as including ongoing account management with a fee paid by participants, or no-cost, point-in-time advice.
2. Engagement level before and after retirement. How well does the provider engage with participants, collaborating with them to meet retirement goals and urging them to boost savings rates? What kind of advice does the provider offer after retirement versus standard withdrawal rates? With some providers, both factors are either missing or nonexistent, so it is important to make sure these are integral to the service.
3. Collecting additional participant information. The information gathered from participants helps create a more personalized investment allocation than that of a target date fund. However, this data collection may be slow to obtain as some participants may be difficult to reach. A good vendor will have a roadmap for how they plan to gather more information from employees and how to increase participant engagement.
4. Difficulty comparing managed account service providers. Only a very few managed accounts service providers serving DC plans exist in today’s marketplace. In addition, recordkeepers generally offer services from one of the managed account providers, making the managed account service dependent on the recordkeeper’s platform and potentially difficult to find a replacement in the case of a change in recordkeeper.
5. The challenge of measuring performance. With individualized investment portfolios or managed accounts, it is more difficult to gauge performance against stock index benchmarks. This is not just specific to managed account services but also applies to target date funds. The performance benchmarking is indicative based on the glidepath whether they manage to or through retirement.
6. Fiduciary role of the provider. Will the managed account provider take on a fiduciary role with regards to the advice provided to the participant? Even though the plan sponsor still has the ongoing duty to monitor the provider and make sure it is acting in the best interest of the participant, the managed account service should protect sponsors from fiduciary responsibility for recommendations given to account holders.
7. Investment principles and asset allocation methodology. What kind of investment philosophy and asset allocation methodology does the provider use, and how does it mesh with your own investment advisor’s approach? If you already use a managed account provider, has its methodology changed recently? Is the service provider helping participants get to the right allocation based on their individual needs? How well does the service provider offer the ability to customize portfolios? Is the service provider driving changes in savings rates? And is the service providing participants with a planned retirement age based on their individual situation?

These tips can help you evaluate and choose the best managed account service to help your employees increase savings rates and meet their retirement goals. Strengthen your benefit offering and employee retention by providing a more personalized retirement strategy, backed by a professional asset allocation, with a greater likelihood of having better retirement outcomes due to increased engagement.

¹ Johnson, S. (October 15, 2024). Pros and cons of different advisory fee models. Envestnet. Retrieved July 24, 2025, from https://www.envestnet.com/financial-intel/pros-and-cons-different-advisory-fee-models.

² Godbout, T. (July 29, 2025) Managed Accounts, Who Are They Good For? Retrieved July 31, 2025, from https://www.psca.org/news/psca-news/2025/7/managed-accounts-who-are-they-good-for/.

³ Mintzer, A.C. (June 3, 2025). Bringing advice to the masses. Planadviser. Retrieved July 24, 2025, from https://www.planadviser.com/exclusives/bringing-advice-masses.

⁴ Samuels, R. (February 19, 2025). Lower managed account fees would likely increase plan sponsor adoption. Plansponsor. Retrieved July 24, 2025, from https://www.plansponsor.com/lower-managed-account-fees-would-likely-increase-plan-sponsor-adoption .