PLANADVISER - September/October 2017 - 26

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Benchmarking Managed Accounts
Some experts say they should be measured against individuals' goals
A CRITICAL question for advisers to ask
when suggesting managed accounts
to a plan sponsor client is whether
it will be possible to benchmark the
performance of potentially numerous
different managed accounts in a consistent
way across the plan population.
Because each managed account
will be customized for an individual
participant, taking into consideration
As a managed
account is really
a service rather
than a product,
it really makes no
sense to benchmark
the account's
performance
against an index.
the person's risk tolerance, account
balance, compensation, deferral rate
and outside assets, the process of
benchmarking managed accounts can
get quite complicated.
As Kendrick Wakeman, president
of investment analytics firm
FinMason, puts it, " A managed account
is designed to take into account a
participant's specific tolerance for risk
and his financial situation to determine
how much investment risk he
should have in his portfolio. " Given the
wide range in individuals'
financial
circumstances across any employee
population, it is reasonable to assume
there will be some diversity in their
managed account construction.
Jason Grantz, director of institutional
retirement consulting at Unified
Trust Co., says it is
important
Being
for
managed account providers to understand
what sponsors would like to see
their plans accomplish. " For instance,
unable to
ever retire
Living
paycheck
to
paycheck
Source: GOBankingRates
if the goal is to replace 70% of income
in retirement and [participants] are
starting out at a 40% level, measuring
how that improves is a good way to
benchmark the progress of a managed
account. "
As a managed account is really a
service rather than a product, Grantz
says, it makes no sense to benchmark
the account's performance against
an index. " If you are invested in a
large-cap core fund, you do want to
benchmark it against a large-cap core
index to see if it is hugging the index, "
TALKING POINTS
Financial Pros' Displeasure
Over Fiduciary Rule
83%
75%
50%
37%
Believe it will
require clients to
sign more
paperwork
Say they will
serve fewer
clients with
$25,000 or less
in assets
Source: Financial Services Roundtable
Americans' Financial Fears
22%
20%
18%
16%
11%
8%
4%
Being
unable
to get
out of debt
Losing
their job
Losing all
of their
money in
the stock
market
Being
unable
to ever
afford
a home
Always
having
a low credit
score
Say it prevents
them from
serving their
clients' best
interests
Say it impacts
their work
methods
" a lot "
35%
Say their
clients have
expressed
anxiety over it
Grantz says. " But a managed account
is a customized service, and it should
be measured against the participant's
stated objective. "
Anton Honikman, CEO of managed
account provider MyVest, agrees. " The
traditional concept of benchmarking
a mutual fund is inappropriate for a
managed account due to its customization.
If you are personalizing an investment
solution, you are doing so to meet
the plan participant's goals,
including
having a certain amount of money
saved. " -Lee Barney
26 | planadviser.com september-october 2017
http://www.planadviser.com
PLANADVISER - September/October 2017

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