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Managed Account Adoption Grows as Employees Recognize the Value of Professional Help Amid Market Turmoil

03/09/2016

BOSTON – Managed accounts are experiencing increased demand and appreciation, according to Fidelity research that looked at how employers and employees viewed and engaged professional help for their retirement plans1. The study found that employers see managed accounts as a valuable workplace benefit and that workers' interest is piquing as they seek professional guidance in the midst of ongoing market instability.

Employers view managed accounts as a good attraction and retention tool, with more than half (51 percent) citing the offering as a way to retain employees, and 49 percent saying the service helps to attract the best employees.

In addition, almost two-thirds (57 percent) of companies said that workplace managed accounts were "very important" to help employees prepare for retirement, while 53 percent said the service ensures employees are investing their retirement savings appropriately.

When exploring the value of managed accounts with workers, Fidelity found that to know managed accounts is to love them. About half (48 percent) of managed account users said that the ongoing monitoring of their investments was one of the most valuable things about the offering. Forty-four percent the said that the annual review was essential and 38 percent said that ongoing management was beneficial, as well.

However, employees who didn't have a managed account were less likely to value them as a result of not understanding the offering or the benefit. Thirty-nine percent of employees who did not have a managed account said they lack understanding of what is being offered, and one-quarter (25 percent) said that not knowing enough about them is a major barrier to adoption.

But when those same employees were walked through what a managed account is and how it offers ongoing professional management of their retirement accounts, over half (54 percent) said that the concept was relevant to them, 52 percent said they would find the service useful and 46 percent said they would like to find out more.

In response, employers are recognizing the need for increased employee education around "do it for me" solutions, such as target date funds and managed accounts. In fact, eighty percent of Fidelity clients who adopt workplace managed accounts are using educational programs to help employees gain the knowledge they need.

"Employers are realizing that education is a critical component in the managed account dialogue," said Sangeeta Moorjani, senior vice president of Fidelity's Professional Services Group. "Employees seek professional guidance to help them navigate the uncertainty in the markets. Workplace managed accounts serve as a 'shock absorber' to help cushion investors from dramatic swings. Companies are providing the educational resources and direction needed to help employees recognize the value so they can take full advantage."

Fidelity's Managed Account Business Continues to Experience Significant Demand

Fidelity's managed account offerings experienced significant growth in the past year. Overall, the use of Fidelity's professionally managed account portfolios – which include both workplace and retail -- increased significantly and assets under management topped off at over $212 billion in 2015.

Fidelity® Portfolio Advisory Service at Work (PAS-W) -- Fidelity's proprietary managed account offering for workplace retirement accounts -- also experienced significant demand. Fidelity added 664 new plan sponsors to its PAS-W business for a total of 3,861 clients at the end of 2015, about 21 percent growth over the prior year. Enrolled participants in the service grew 46 percent in 2015 to just under 237,000 participants, and assets under management grew 34 percent to about $14.5 billion.

PAS-W is fully integrated into the overall Fidelity Workplace Participant offering so employees receive a consistent cross channel experience when saving, planning and investing for retirement, whether they choose to do it themselves or enroll in a professionally managed account. For more information on PAS-W, plan sponsors or consultants can contact their Fidelity representative.

About Fidelity Investments

Fidelity's goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.2 trillion, including managed assets of $2.1 trillion as of June 30, 2015, we focus on meeting the unique needs of a diverse set of customers: helping more than 24 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with technology solutions to invest their own clients' money. Privately held for nearly 70 years, Fidelity employs 41,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

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