AVENTURA, Florida – There were no investigators from the Government Accountability Office at the Plan Sponsor Council of America meeting at the Turnberry Isle resort Wednesday, not at least any I could detect.
Which is too bad, really, because they might have done well to listen in to a defense of managed accounts in 401(k) plans, the target of a damning GAO report this summer.
While the palm trees surrounding the property swayed in a gentle breeze, Nancy Gerseny, the corporate retirement plans strategy manager at CVS Health, was the star witness, pretty much equating managed account services to sliced bread.
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The bottom line, she said, is that average savings rates for her company's 401(k) participants are higher among those who turn to online and managed account services.
That's a good thing, of course.
The 2008 financial meltdown, she said, underscored for most participants that they needed help. CVS introduced advisory services to its 90,000 or so participants by the following year.
The provider in its case, California-based Financial Engines, also had a few figures to share Wednesday that helped to tell the story of managed accounts. The most compelling? The median annual return for participants who get help is 3.32 percent higher than for those who don't, its representatives said.
Its representatives also noted that 53 percent of participants who use managed account services will bump up their contribution rates, with the average rising to 9.5 percent from 6.2 percent.
I don't know whether Gerseny (or anyone else in the room) had read the GAO report slamming managed accounts but even if she had, I somehow doubt it would have swayed her.
And that's good, too, because here's the thing to remember: most people are mostly in the dark about how much they'll need to be able to retire without living under a bridge.
In other words, they need the help that managed accounts can offer. More employers are doing what CVS did. According to PSCA figures, 36 percent of the companies it surveyed offered managed accounts in 2012, up from 25 percent in 2005.
Now, having said all of the above, I also don't think it's very smart to ignore the GAO's finding.
The GAO's investigators found a wide variance in fees charged by providers — between $8 and $100 on every $10,000 invested – and, most crucially, said these higher fees can wipe out the higher returns seen in managed accounts.
Also, limited fee disclosures as well as a lack of adequate benchmarking leaves managed account holders in the dark about what they pay for the service and whether the results are worth it, the GAO said in its report.
Someone in the audience at the PSCA session asked about Financial Engine's managed account fees and was told they start at 60 basis points and tier down, based on the size of the account.
Whether that's too high, too low or just right depends on a gazillion factors. But any CVS plan participant who has paid that fee – it comes out their own pockets, not the corporation's – is, I hope, watching carefully.
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