Little Known 'Managed 401(k)' Poised for Growth in 2007

Share Article

The little-known "managed 401(k)," which allows a 401(k) account holder to have a professional manage their account for them, is poised for significant growth due to a "perfect storm" of national trends. Three types of managed 401(k) accounts identified by leading blog.

The little-known "managed 401(k)," which allows a 401(k) account holder to have a professional manage their account for them, is poised for significant growth due to a "perfect storm" of national trends. Traditional pensions and unanswered questions surrounding the viability of the Social Security System combined with the recent signing of the Pension Protection Act could bring the "managed 401(k)" onto the national stage in 2007.

A managed 401(k) solution allows individuals to choose a financial professional to manage their 401(k) or 403(b) account on their behalf. While this service has existed since late 2001, the recent signing of the Pension Protection Act in August has breathed new life into the managed 401(k) / 403(b) industry. December 14th marked the 5th year anniversary of the managed account, when the Department of Labor issued the "SunAmerica Opinion," launching the managed 401(k) (http://www.dol.gov/ebsa/regs/AOs/ao2001-09a.html).

Even though the managed account industry is relatively young, three different kinds of services have evolved during the past 5 years. According to Actium's managed 401(k) / 403(b) blog (http://www.myactium.com/blog), the three types of managed account services meet different needs within the 401(k)/403(b) industry:

Three Types of Managed 401(k) / 403(b) Solutions:

Cross Sellers - Provide a managed 401(k) / 403(b) service along with a number of other services like annuities, financial planning, insurance sales, etc.

Mass-Marketers - provide a managed account service via technology delivered via the internet with little or no personal contact.

Personal 401(k) Management - is a service that has a singular focus on managed 401(k) / 403(b) solution that includes personal, face-to-face contact, on-site meetings, proactive communication, and personal annual reviews with employees.

According to the Employee Benefit Research Institute, "Workers who do not currently have access to professional investment advice through their employer would be most likely to take advantage of such advice if it were made available in-person rather than online or over the telephone." In fact, the study showed that 72% or those surveyed would likely use an advice service if it was delivered in person. (Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2006 Retirement Confidence Survey.)

"A managed account service delivered face-to-face with employees could be the big story in the 401(k) industry in 2007," said Jeff Sinatra, COO of Actium. "In terms of how a personal 401(k) management service can impact plan participants, it has the potential to deliver a great deal of good."    

2007 could be a year in which those who own a 401(k) or 403(b) finally receive the help of which they've been asking.

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

JEFF SINATRA
Visit website