One Portfolio at a Time: Adaptive Managed Accounts Seek Optimal Retirement Incomes

Interview with Terry Burns
Retirement readiness of DC plan participants is making a great leap forward, through the evolution of adaptive investment technologies and managed accounts. Drawing on a rich set of personal information, these tools support advisers by enabling customized asset allocation based on the circumstances of each participant.

One implementation is the Personalized Retirement Account offered by OneAmerica®, in a collaboration with Russell Investments. To learn how these new technologies develop customized retirement outcomes, PLANADVISER recently spoke to Terry Burns, Assistant Vice President of Products and Investments at OneAmerica, a more than 140-year-old financial services company.

PA: What advantages can Personalized Retirement Accounts, or PRA, have over traditional DC investments?

Terry Burns
: It’s all about asset allocation and adapting to changing circumstances. In our participant surveys and research, we’ve found that everyone needs help—no matter their income, age, or industry. The PRA approach seeks to serve the needs of all of them and remove the guesswork from investing. While target date funds can be a good start, they’re anchored solely on participants’ ages. The PRA tool reaches a higher level of customization, incorporating demographic and financial information that enables Russell Investments to create a unique retirement roadmap for each individual and revise that plan for changes in income, assets, and markets. And from the sponsor’s perspective, it can customize the entire plan, starting at the participant level. That’s why we think PRA makes sense as a qualified default investment alternative, or QDIA.

PA: One of the challenges of managed accounts has been gathering enough supplemental information on each person. How do you encourage that?

: We’re able to build tremendous insight from each participant’s age, gender, salary, contribution rates, and account holdings. With this information, Russell Investments’ Personal Retirement Accounts then calculates an initial personalized asset allocation for each individual.
But that’s just the start. People can use our secure website to access the Personalized Retirement Planner, and input information about additional assets such as their IRAs, taxable accounts, and their spouse’s assets. With this additional data, Russell Investments can develop a holistic perspective of an investor’s financial situation and personalize the roadmap even further.
This account aggregation approach provides a more complete picture. Combined with adaptations over time, participants can potentially realize a better outcome at retirement.

PA: How often is the asset allocation adjusted and rebalanced?

: Personalized Retirement Accounts reevaluate the asset allocations quarterly. And it’s not just a rebalancing—the adaptive technology provides a fresh analysis to review whether the individual is on track for a maximum expected retirement income.

PA: Does the PRA tool change the role of plan advisers?

Burns: No—they remain central to managing the plan. They still guide sponsors on plan design and choose the investment vehicles as a function of providing fiduciary services. We think PRA is a strong complement to the services they already provide.

: What additional fees are involved for the managed account?

: We expect the cost of the PRA service will come in at between 18 and 28 basis points. That’s about half, or less, of the 50 basis points typically charged for managed accounts. We think there’s a lot of value there. OneAmerica is also present with our relationship managers to support all involved in their plan design and education strategies.

OneAmerica® is the marketing name for the companies of OneAmerica.
Products issued and underwritten by American United Life Insurance Company® (AUL), a OneAmerica company.

Administrative and recordkeeping services provided by McCready and Keene, Inc. or OneAmerica Retirement Services LLC, companies of OneAmerica which are not broker/dealers or investment advisors. Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice.

Russell Investments is not an affiliate of any OneAmerica company.

Personalized Retirement Accounts are a product of Russell Investments Capital, LLC. Personalized Retirement Accounts utilize processes and components of Russell Investments’ U.S. patent number 8,671,045, entitled “Method and System for Implementing an Adaptive Investing Methodology.”