Financial well-being is one of the most important parts of benefit programs offered by companies, and many workers are expecting their employers to help them navigate their financial futures. This increase was accelerated by the uncertainty brought by the pandemic when more employees showed interest in getting personalized guidance to make smarter financial decisions. Employers expanded their benefits, but some subjects remained challenging: retirement planning.
We can observe a solution that gained popularity, and this is the managed account, a tool providing personalized investment advice while helping employees and, in particular, retirees to achieve better financial outcomes, especially long-term.
What’s a managed account?
A managed account is in fact an investment account where a professional in finance, like an advisor or portfolio manager, will take the responsibility for managing it based on your specific financial goals, timeline, and risk tolerance. Different from generic retirement funds, managed accounts offer unique investment strategies tailored to a specific financial situation. More and more people choose to hand over the day-to-day management of their investments, making sure that their retirement savings are optimized for their needs.
For years it had been a focus on well-being programs, but the pandemic made them more necessary. Even though companies tried to improve their programs, many workers are dealing with a tough time financially. Apparently, less than half of employees are optimistic and positive about their overall well-being.
So, there is certainly an issue that is not easy to fix. With so many demanding factors—work, school, family—healthcare and saving for retirement don’t really have too much attention left, so even when employees try to save, it’s hard to make the right decisions and balance health and financial needs. This is another cause of stress that can affect both work performance and a company’s overall success.
This is why a solution many companies found is to offer managed accounts, providing employees with access to experts who can offer personalized advice and strategies to improve their retirement savings.
Seeking financial guidance
More than ever, today workers are looking up to their employers to help them make smarter financial decisions in such an uncertain economy. Of course, financial well-being is understood differently by everyone, and this is another reason why there are so many accessible tools, like managed accounts, one-on-one counseling, and online financial tools.
More than half of the US companies agree that financial well-being programs have become more important in the last two years, and more than half believe that it’s important to provide tools for their employee’s long-term needs.
Retirement plans are supposed to be flexible, based on any unique situation, and to offer solutions based on each individual. There is a need for a trusted source—someone who understands financial goals and the normality of living a healthy life. By redirecting this focus and not thinking about conflicting advice, employees can finally focus on their overall well-being.
Benefits of managed accounts
1. Personalized advice
Managed accounts come with personalized advice from professionals who focus on helping you meet your retirement goals. Using a managed account can bring you peace of mind, knowing that your savings are managed with the best investment decisions and in your best interest. This personalized support is a real help for employees to stay on track and reduce the stress coming from trying to figure it all out by themselves.
2. Professional oversight
Retirees can benefit from ongoing management that makes adjustments based on market conditions and personal circumstances. This reduces the risk of costly mistakes that retirees can make by managing everything on their own.
Many people are not comfortable when it comes to managing their investments because they may not have the knowledge to make informed decisions. It’s important to know you can rely on a professional, and this can give you a sense of confidence knowing your retirement funds are managed with the best interest in mind.
3. Long-term outcomes
People using managed accounts experienced a better long-term investment return compared to those who didn’t, even after the fees. This can be a real help for retirees to know they have enough savings to last throughout their retirement years.
Over a 10-year period, employees who used managed accounts earned an average of 0.27% more each year, after the fees. Moreover, people with managed accounts are more likely to stick with them long-term compared to those who don’t use personalized advice.
4. Win-win situation
When it comes to managed accounts, there are other aspects of a retiree’s financial life, like healthcare expenses and long-term care or estate planning, that can help them make smarter financial choices, more than just investment strategies
It’s not just employees who benefit from managed accounts. Employers benefit too, because employees who don’t retire on time can increase the costs for organizations. A study on defined contribution plans showed that even a one-year delay in the average retirement can raise workforce costs.
Managed accounts can be offered as a part of an employee retirement plan, and it allows workers to have their retirement savings managed and tailored to their financial situation. Incorporating managed accounts into their benefit packages includes selecting a provider of these services. This is how it generally works:
First, you will need to choose a managed account provider: employers partner with a financial services company that specializes in offering managed accounts. Providers could be standalone financial advisors or a company that can provide a full suite of retirement services.
Once you set up the managed account option, employees can opt into the program as part of their retirement plan. Depending on the employers, they can either offer it automatically to all employees or choose it as part of their 401(k) or any other contribution plan option.
By signing up, employees will go through an initial consultation or assessment process with a financial advisor or through an online tool. This helps with providing an understanding of the employee’s financial goals, time horizon for retirement, and risk tolerance, plus other essential factors such as debt or major life events.
How employees interact with managed accounts
After they are enrolled, employees have an ongoing relationship with their account, and it’s usually a hand-off experience.
Individuals can expect regular reviews of their managed accounts, either from their financial advisor or from an automated system that periodically reviews and makes adjustments to the investment portfolio. This can happen once a year, twice, or whenever there is a significant change in the market or the employee’s life
Automatic Adjustments Based on Life Events
Managed accounts can offer flexibility by automatically adjusting the investment strategy based on life events like marriage, the birth of a child, or buying a house. If an employee reports major life changes, the account manager can adjust the asset to better align with the new financial goals.
Managed accounts are a valuable addition to employee benefit packages, offering personalized help for retirement savings. Benefiting from expert financial guidance leads to smarter investment decisions without the stress of managing everything themselves. With regular reviews, a variety of investment options (bonds, stocks, or mutual funds), and automatic adjustments, managed accounts bring employees’ retirement strategies to alignment with their unique goals and circumstances.
These accounts offer peace of mind and flexibility, allowing individuals to focus on their lives and work with confidence and a positive view of their financial future. Providing managed accounts fosters financial well-being for employees. This turns out to be a benefit for employers as well because they end up with a more engaged and less stressed workforce. Such measure ultimately supports both employee satisfaction and company success.
Find out if your company knows about the benefits of managed accounts and they advocate for offering them to you. This financial planning can make a huge difference in your financial well-being.
If your employer doesn’t provide them, you should take the initiative and explore managing accounts by yourself. This is a great step to secure a smarter, stress-free retirement strategy.
Now you can light up a “Smells like it’s not your problem anymore” candle and live your best life.
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