Personalization in managed accounts is no longer a trend;
it’s a megatrend, according to Steve McCoy.
Historically, there has been a reluctance to adopt managed
accounts due to perceived need for proactive participation, lack of technology,
higher costs, and poor user experience. Recent innovation has removed these
barriers. Advances in investment methodology application and user experience
has led to higher engagement.
“No matter what you’re talking about or who you’re talking
about regarding a managed account, a participant experience is absolutely
critical,” McCoy, CEO of retirement plan fintech provider iJoin, said when
discussing a new managed account technology partnership with LeafHouse
Financial. “Our competencies around the participant experience and delivering
that through our technology has helped well-position us in the managed account
arena.”
Calling it a focal point for the firm, he added that
platform flexibility is also an important factor, as is the ability to equip
recordkeeper partners to respond to demand that he says will take on different
shapes and forms.
“Our strategy from the beginning was to get flexibility
nailed for our partners, and then ultimately bring it all to market using
technology to lower the cost drastically.”
Dramatically lower cost translates to about one basis point
for the technology, which McCoy said is a “micro fraction” of the rest of the
market with managed account pricing.
What does it mean to equip recordkeeper partners? Todd
Kading, President and Cofounder of LeafHouse Financial, and McCoy claim that
equipping recordkeepers equates to ease of use, lower cost, ability to add
margin for recordkeepers, and flexibility to let advisors create portfolios
that suit their view of markets and participant needs.
“Will the managed account be deployed as an opt-in solution,
or can you make it the default?” McCoy explained. “Can you have it tightly
integrated with that primary participant web experience? What kind of
flexibility do you have accomodate around multiple providers or methodologies?
We keep the digital experience and the participant experience relatively
consistent, but it can work with different providers.”
In addition to working with multiple providers and
methodologies, assigning the investment strategy to the client also requires
flexibility.
Rather than forcing an advisor to plug in to the
preconceived notions of a managed account provider’s portfolio, McCoy
approached LeafHouse about developing proprietary technology in keeping with
the personalization theme. The result, the LeafHouse-iJoin Managed Account
Program (MAP) is available through more than 40 independent recordkeepers that
deploy the iJoin platform.
Making use of application programming interface (API)
technology, iJoin communicates with LeafHouse’s system to dynamically create a
personalized managed account allocation based on each user’s unique data and
the advisor’s lineup, something it’s able to do four times a second for 350,000
participants a day.
“An advisor-managed account really should have the ability
for the advisor to manage something, rather than being stuck in a paradigm that
they can’t get out of,” Todd Kading said. “If an advisor doesn’t want us to use
an intermediate core bond index, I shouldn’t force them to give us an
intermediate core bond index. If an advisor doesn’t want us to use a large
value, I shouldn’t force them to give me a large value. It’s truly an advisor
manage account.”
While noting that efficient technology and cost have
traditionally limited the appeal of personalized managed account solutions, the
LeafHouse-iJoin Managed Account Program (MAP) is completely different from
anything currently offered in the marketplace.
“The algorithm doesn’t boot a plan out of the system because
the advisor or the plan sponsor didn’t give us a category that we thought we
needed in our allocation,” Kading concluded. “We just give them the next best
choice. And if they don’t have that category, we give them the next best choice
and so on down the line. It gets to a point where if you give us a 404c
compliant lineup consisting of cash, a fixed income, and an equity position, we
can send you back a personalized portfolio every single time.”
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