A narrow majority of defined contribution plan consultants and advisers say managed accounts provide less benefit to participants than target-date funds, according to a survey by Pacific Investment Management Co. LLC, Newport Beach, Calif.
Fifty-one percent of respondents disagreed with the statement that managed accounts' costs relative to target-date funds "are justified/reasonable given the value to participants," said a report on the survey of consultants who represent more than 17,000 DC plans with total assets exceeding $4.4 trillion.
Only 3% strongly agreed with the statement, 10% agreed and 35% agreed somewhat.
Participants' inadequate cooperation with managed account providers is part of the problem. Forty-one percent of respondents disagreed with the statement that participants "tend to add personal information, rendering advice more valuable." Only 6% strongly agreed, 20% agreed and 33% agreed somewhat.
"We continue to hear that a lot of participants don't do it," Stacy Schaus, PIMCO's executive vice president and defined contribution practice leader, said in an interview. "It's a challenge to educate them. I think there's more work to be done."
The survey of 77 consultants and advisers also found divergent views about the value of managed accounts. For example, 9% strongly agreed, 22% agreed and 38% agreed somewhat that managed accounts' investment methodology is "equal or superior" to that of target-date funds, while 32% disagreed. Also, 9% of respondents strongly agreed, 26% agreed and 43% agreed somewhat that managed accounts "help increase plan participation and/or contribution levels." However, 23% disagreed.