PLANADVISER -May/June 2022 - 23

ANNUITY INTEGRATION
In the 2022 Retirement Insights Survey from TIAA, among
employees not interested in an in-plan guaranteed lifetime
income annuity, cost is the top reason cited. According to
TIAA, employers recognize this dynamic, and they often
see products' complexity as a major challenge preventing
broader adoption of guaranteed lifetime income solutions.
Generally speaking, employees see such products as more
pricey, confusing and restrictive than employers do-
perceptions that highlight
the opportunity for
targeted
education and communication efforts or for creating interest
in solutions embedded in other investments.
Delaney worked closely on a partnership, announced in
February, in which Morningstar Investment Management
LLC and Hueler Income Solutions LLC linked their services
so that participants may incorporate a guaranteed-income
product into their Morningstar managed account. If sponsors
offering access to Morningstar managed accounts
through their plan decide to make annuities available as an
option on an out-of-plan basis through Hueler, Morningstar
will recommend to an interested participant how much, if
any, of that individual's portfolio to allocate to a lifetimeincome
product, based on the person's specific situation.
Hueler also provides Morningstar with real-time quotes for
institutionally priced annuities. The Morningstar/Hueler
offering is slated to go live in July.
" It's a nice way to offer a bridge between accumulating
savings in a plan and the income someone needs in retirement,
without a sponsor having to include a retirementincome
option on the core menu, " says Daniel Bruns, head
of digital advice at Morningstar Investment Management
in Chicago.
Of course, some sponsors of plans that utilize Morningstar
managed accounts also offer in-plan retirementincome
products. " Whether our service will give someone
advice on specific retirement-income products comes down
to whether any products are available in that person's plan, "
Bruns says. Morningstar will give individualized advice on
such products in a plan.
Some managed account providers will offer educational
guidance on retirement-income products, but will not offer
individualized advice. If participants in an Edelman Financial
Engines managed account want to buy an annuity, O'Donnell
says, " we would be giving guidance and telling them what
they should be looking for in [one of these] products, but we
would not recommend specific annuities. "
Whether Fidelity's managed account service will give
guidance on retirement-income products " will depend
very much on what is available within an employer's plan, "
Pannozzo says. " Some offer an in-plan annuity, and many do
not. " Fidelity's managed account service does not give individualized
advice on specific annuities.
Whether a plan offers an in-plan annuity product or
not, GuidedChoice can model different options for how
participants could utilize an annuity, Grabot says. " They
can choose the percentage of their account that they want
to annuitize, and then we model what that will mean in
monthly guaranteed income, " she says. " A managed account
service has to be able to model what participants will get
in monthly income if they choose to buy an annuity and
what that cost would be for the participant. You have to help
them through it, because annuities are complex. "
THE OUTLOOK
Personalization comes at a cost, and OneDigital's Esselman
points to the extra expense as the main reason that sponsors
utilize managed accounts far less often than targetdate
funds as the default investment for automatic enrollment.
" But the price of managed accounts continues to
come down, and we're seeing their ability to customize
advice increase, " he says.
Today's managed account products are about 70% of
the way there to addressing a participant's decumulation
needs, Esselman says. " We've still got another 30% to go. "
That will come, he says, from improved technology that will
allow managed account services to get more granular with
individualized recommendations. He points to possibilities
such as advice on specific retirement-income products, as
well as guidance about specific planning issues-e.g., how
much a retiring participant can afford to spend on nonessential
items such as travel.
Within a decade, Esselman foresees technology being
able to offer individualized guidance that closely resembles
what a participant receives in a one-on-one adviser meeting,
for a significantly lower
fee
than managed accounts
currently charge.
What role will a retirement plan adviser play in that
scenario? " Plan sponsors will always need someone to do
the due diligence on the recommendations and advice to
participants that a managed account service is actually
giving, " Esselman says. " Advisers will still have to go in and
drill down, to understand the modeling behind the recommendations
a managed account service makes. "
Overall, 24.6% of plans offer a professionally managed
account service to participants, according to the 2021 PLANSPONSOR
Defined Contribution Plan Benchmarking Report.
Just 3.4% of plans surveyed utilize managed accounts as
their plan's default investment for automatic enrollment,
compared with 75.6% utilizing target-date funds.
Plan sponsors have many things to think about when
considering managed accounts as a default investment,
Bruns says. " Fees are certainly a consideration, but it's also
an issue of the value participants receive for the fees, such
as helping [those individuals] with the transition to their
decumulation phase, " he says.
" A sponsor needs to look at the demographics of that
plan, " he continues. " Some plans have very similar employee
demographics and planning needs: Everybody is about
the same age and has about the same tenure, same pay
and same savings rate. Other plans have employee demographics
that vary a lot. Professional services firms have
employees with very diverse backgrounds and planning
needs, for example-that is where managed accounts can
make a great deal of sense. " -Judy Ward
planadviser.com May-June 2022 | 23
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PLANADVISER -May/June 2022

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