Franklin Templeton and Stadion Money Management have announced they have entered a partnership aimed at delivering personalized participant managed account solutions in the defined contribution (DC) marketplace.
Through the partnership, Stadion, a retirement plan managed account provider, will deliver technology and consulting services to support Franklin Templeton’s goals optimization engine (GOE), which offers personalized investment solutions to retirement plan participants.
Todd Lacey, chief revenue officer at Stadion, spoke about the motivation behind the partnership in an interview with PLANADVISER.
“In the past couple of years, we’ve seen a lot of demand from different firms in the industry that want to offer a managed account service inside a retirement plan,” he said. “In order to do that, they need the tech to deploy that managed account to a recordkeeper. [Franklin Templeton] developed its own offering and it needed a tech partner to support that so the firm could distribute it through different recordkeepers.”
According to Franklin Templeton, GOE delivers individualized portfolio pathways based on a participant’s goals. With the ability to handle multiple investor goals, GOE uses probability of success as the driver for the initial asset allocation and each reallocation to maximize the likelihood of achieving the goal. Portfolio paths further adapt to client changes and market events. To enhance the GOE product, Stadion Technology will provide consulting and technology to advisers and asset managers entering the managed account and participant advice space.
Lacey says the growing trend toward personalization in retirement accounts motivated the partnership between the two firms. Rather than investing in a target-date fund (TDF) or selecting an all-purpose approach to investing, more participants are reaching for a tailored design, he says.
“Participants have clearly expressed a desire to have a more personalized experience, and we get that. Historically, retirement plan participants have not had access to personalization,” he notes. “They’ve had to select their own investments, and they’ve been pointed to a TDF, which is a one-size-fits-all option that’s based on age only or retirement date only, so that’s how it’s been done for years.”
He says managed accounts and an interest in more personalized approaches also tie in to the rise of digitalization and participants’ desire to manage their retirement accounts and investments on an online platform. With Stadion’s technology, for example, participants can add outside assets, risk tolerance or other key components about themselves that then allow Franklin Templeton to design a more tailored portfolio.
“Managed accounts have become more prominent because people not only want, but expect, a personalized experience,” Lacey says. “That comes in the form of a managed account, but it can also include the broader digital experience that a participant may have.”
Looking forward, Lacey says he anticipates a further rise in personalization from employers and large-to-mega 401(k) providers. “This is further evidence that personalization is here and more of it is coming,” he says. “We’re just excited to be [Franklin Templeton’s] technology partner and to see how this grows.”