Stadion Money Management, a Georgia-based RIA defined contribution specialist, is rolling out a managed account program based on what the firm calls “defensively-oriented” investment strategy.
The accounts will leverage exchange-traded funds, or ETFs, which have seen explosive growth in the retail investment market in the past year, but have not been widely adopted in the 401(k) market.
The new program will target smaller plans, according to a company release.
“Participants in the nation’s smallest 401(k) plans have been overlooked by the retirement industry because there hasn’t been an efficient way to deliver customized advice down to the plan participant level in micro and small plans,” said Tim McCabe, senior vice president at Stadion.
McCabe noted that 90 percent of retirement plans have assets less than $5 million.
“There’s an awful lot of Americans saving for retirement without advice, direction, or perhaps even access to the most appropriate investment vehicles,” he added.
According to the company’s website, the accounts’ most aggressive growth strategy, for participants under the age of 49, has a 50-percent allocation to equities.
That’s a much more modest allocation than many target-date strategies. Fidelity, for instance, has participants in the same age group invested up to 90 percent in equities.
As a part of its managed account service, Stadion can increase equity allocations up to 90 percent in low market risk environments.
As with other managed accounts, Stadion is marketing a more personalized approach than participants can get investing in target-date funds as a qualified default investment.
“Target-date funds have not leveraged their leadership largely because they fail to take into consideration that plan participants are individuals, and these individuals retire one at a time,” said McCabe.
Through the platform’s interface, participants can input information such as assets outside of plan accounts, and spousal and family information, to craft a more personalized savings plan.
“In the large plan market, customization has become the norm both at the sponsors and participant level,” said Jud Doherty, Stadion’s CEO.
While Stadion also has a lineup of proprietary target-date and target-risk funds, which are also built on ETFs, the company is wagering that technology innovations can be leveraged to bring competitively priced managed account options to participants in small plans.
“It’s unrealistic to assume one glide path works for everyone,” he added. “We believe our glide paths, built using low-cost ETFs with a defensive bias, are the next generation of investing in the small market.”
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
