Engagement, data and AI support can help make managed accounts effective for more plan participants.
Most 401(k) and 403(b) participants don’t want—and may find it too challenging —to build and manage their own portfolios. This has helped drive the growth of target date funds (TDFs), which have surged to more than $4 trillion of the $13 trillion in defined contribution assets as of the end of 2025, drawing over 60% of new contributions over the past year.
That said, in an age of growing personalization, many industry professionals recognize that TDFs, which put everyone born in a given five-year period into the same asset allocation, are often not a perfect fit. Indeed, we believe that managed accounts, especially advisor-managed accounts, may be preferable.
Adoption of managed accounts remains relatively low—similar to where target date funds were before the Pension Protection Act of 2006 and subsequent QDIA guidance helped establish default investment frameworks. Today, many plan fiduciaries and professionals are cautious about using managed accounts as the default without meaningful participant engagement because without that engagement and ongoing guidance, the experience may not materially differ from a target-date approach while potentially adding cost.
In our view, designing programs that encourage informed engagement can potentially help managed accounts deliver more individualized, goal-aligned support for participants.
While wealth and retirement plan advisors alike may be interested in serving active participants in DC plans, there are challenges. The vast majority of those participants do not have enough assets to warrant personalized financial planning, let alone wealth management, and most advisory firms have not figured out new systems and processes to profitably serve low-asset cohorts.
We believe advisor‑managed accounts—supported by artificial intelligence, participant‑permissioned information and well‑trained financial coaches—can help deliver personalized guidance at scale that is designed to improve participant outcomes.
Engagement is often a key element in making managed accounts a success, potentially prompting participants to contribute more and to better weather financial storms. However, the type of engagement matters. It should center on non‑commissioned financial coaches whose role is to provide objective, practical guidance that helps participants make informed decisions—without any initial product sales focus. If a participant’s situation appears to warrant more specialized support, the coach can offer the option to connect the participant with a more experienced advisor within the organization at the participant’s request.
Beyond improving potential outcomes generally, advisor-managed accounts may complement plan design by helping participants access private markets through diversified solutions such as target-date funds (including any private-markets sleeve embedded in the underlying strategy), rather than through direct participant selection. Advisor support can also help participants evaluate guaranteed lifetime income options (for example, in-plan income features or retirement income products), which are often difficult to navigate independently.
Who are DC fiduciaries looking for to help make managed accounts viable for their plans?
At a basic level, we think sponsors will seek advisors who can effectively engage with and guide participants on their journey. Beyond financial wellness apps and tools, which are helpful aids, advisors with the capacity to meet participants one-on-one and in group meetings could have a distinct advantage. Importantly, remote meetings have streamlined the process of contacting individuals, allowing for meetings during non-working hours, sometimes accompanied by family members.
Retirement plan advisors (RPAs) able to offer wealth services may be well positioned for managed account business while those unable to work with participants may struggle as plan-level fees, funds and fiduciary services have become commoditized. Similarly, wealth advisors that can’t meet with participants in plans they manage will often have trouble educating participants and potentially having participants seek them out while those who meet with DC plans and their participants and outsource much of the work and service to record keepers, TPAs and third parties may thrive.
In our view, advisor-managed accounts overseen by a fiduciary can provide advice at scale to DC participants, but this takes data, people and process.
