A white paper released on Thursday by Empower Retirement and its subsidiary, Advised Assets Group, a registered investment advisor, posits that investors who aren’t using a managed account solution aren’t just struggling to keep up, they’re falling behind.
An examination of 1,783 defined contribution plans and 315,441 participants in AAG plans found that managed account users had a nearly two percentage point advantage over the five-year period from April 1, 2010 to March 31, 2015: 9.77% for the managed account users versus 7.85%.
The report defined “managed account” as a retirement plan account managed by an RIA. Empower is a DC plan provider; AAG offers managed accounts.
“Proper asset allocation is an essential component to maximizing retirement savings. Through a managed account product, participants can receive the help of an investment professional,” Edmund Murphy, president of Empower, said in a statement. “By doing so, they can take the emotion out of investing and help participants gain the confidence they need that the investments in their retirement plan are properly allocated.”
The paper noted that “while the difference in average performance is certainly an important data point, it’s not the full story.” The study found a wider range of returns for investors who weren’t using a managed account product, with some earning significantly less than 7.8%. The spread between the highest and lowest returns for managed account users was less than 4%, but other investors saw returns as high as 13% (higher than the managed-account users’ high of 11.7%) and as low as 1.6%: an 11.4% spread.