Voya Financial experienced a 10% increase last year in retirement plan participants signing up for managed accounts to get more customized investment management and advice, a trend the firm hopes will continue.

“We saw a big jump in the number of participants that are responding to our campaigns in the last year,” says Andre Robinson, Voya’s senior vice president of retail wealth management and advisory solutions. “We exceeded the threshold we set for managed accounts and expect to have compounded results in 2023.”

Voya, which offers managed accounts through plan sponsor clients, cites participant enrollment campaigns, new plan features and free participant trials as key drivers leading to increased uptake. Communicating to participants is a key priority for the firm as it seeks to make the case that a managed account, while carrying relatively higher fees, can lead to better long-term savings, according to Robinson.

“We ask people if they need help managing their money, and a management account is one entry point for them to consider,” he says. “The goal is to create awareness and offer the option to do that investment management for people who are uncomfortable doing it on their own.”

Robinson says Voya looks to create campaigns around thematic moments when people are thinking about their savings, such as tax season or during open enrollment. The New York-based firm uses data to show how managed accounts can outperform options such as target-date funds, even taking fees into account, and then offers a free trial so participants can see if they like the service.

“I see it like taking a test drive for a new car,” Robinson says. “We work with the plan sponsor on the duration, and it needs to take a certain amount of time for them to see the results … but we think it’s worth it and the right thing to do for participants.”

Not Growth for All

Voya is just one of many recordkeepers and retirement advisories offering managed accounts to retirement plan participants. Even so, managed account uptake within retirement plans is still small compared to the retail market for the service, according to research and consultancy firm Cerulli Associates. Managed accounts assets reached a new high of $10.7 trillion in the retail space in 2022, according to Boston-based Cerulli, as compared with slightly less than $500 billion in plans.

One of the biggest roadblocks to adoption within plans is that managed accounts are not generally used as the qualified deferred investment alternative, says Shawn O’Brien, who leads the U.S. retirement research practice at Cerulli.

“It’s the litigation in this space and the concern around fees that are very significant when it comes to investment decisionmaking and the plan lineup,” O’Brien says, noting that Cerulli research shows that fees have come down for managed accounts. “It’s just so overwhelming for the [defined contribution] market, especially the ERISA-covered plans.”

Vanguard Investments, which also offers low-cost managed account options within plans, showed a slight decline in the offering in a recent preview given to PLANADVISER from its 2023 How America Saves report. The firm said 6% of participants with Vanguard accounts used managed accounts in 2022, a drop of 1% from 2021. That was much smaller than the 59% invested in a “pure,” or single TDF, a percent that increased from 56% in 2021.

“The increase is due to the trend in pure TDF investors,” a spokesperson said of the data. “Each year this increases about two percentage points, primarily due to the increased adoption of automatic plan features such as automatic enrollment and TDFs as most plan QDIAs.”

O’Brien says Cerulli research has found an uptick in plan sponsor interest in dynamic QDIAs, which transitions participants from a TDF into a managed account as their needs grow more complex with age. Those, he says, may be a boon for managed accounts, should they take hold.

Not a Cannibalization

Voya’s Robinson notes that the firm does not prioritize managed accounts over TDFs, but instead it seeks to provide the best solution for the participant.

“We don’t use Product A to cannibalize Product B,” he says. “We are still a TDF supporter and use it in conjunction with everything else to give people options. The pricing is going to vary by opportunity, and that is one of the variables that goes into the equation.”

This year, Robinson says Voya will continue to focus on innovating in the employee experience for managed accounts, as pushed forward by a team that has grown along with participant uptake.

“We’re going to be introducing some engaging and interactive tools,” he says. “We want to give participants insights into the decisions they make and how it will impact them, relative to their individual situations.”