Schwab Retirement Plan Services Introduces Advisor Managed Accounts to Help More 401(k) Participants Receive Retirement Plan Advice

New capability leverages Morningstar managed account technology, enables consultants to build customized investment portfolios for retirement plans they advise

Wednesday, October 14, 2015 8:00 am PDT

Dateline:

SAN FRANCISCO

Public Company Information:

NYSE:
SCHW
"The Impact of Expert Guidance on Participant Savings and Investment Behaviors"

SAN FRANCISCO--(BUSINESS WIRE)--Schwab Retirement Plan Services, Inc., a national 401(k) service provider to approximately 1.3 million workers saving through company retirement plans, is announcing advisor managed accounts for 401(k) plans. Retirement plan consultants who are registered investment advisors will now be able to build and manage customized investment portfolios for the plans they support, integrating recordkeeping services from Schwab Retirement Plan Services and managed account technology from Morningstar Associates, LLC. This new approach greatly expands the capabilities of consultants who serve as registered investment advisors and investment managers for retirement plans and the participants in those plans.

“Access to 401(k) advice is vitally important and advisor managed accounts can help more people receive that advice within their plan. Advisor managed accounts give employers and retirement plan consultants acting as investment advisors much more flexibility in designing investment advice programs to meet the specific needs of employees. This is the next logical step in the evolution of 401(k) plans,” said Steve Anderson, president, Schwab Retirement Plan Services.

Many employers rely on their retirement plan consultant in multiple areas such as guiding plan design, recommending and monitoring plan investments, and helping the employer fulfill fiduciary, regulatory and compliance requirements. With the introduction of advisor managed accounts for 401(k) plans, consultants in an investment manager role can provide customized investment portfolios to participants in the plans they serve.

Brock Johnson, head of retirement solutions for Morningstar, said, “History shows that many participants don’t have the time, knowledge, or interest to save for retirement, but we’ve found that employees enrolled in managed accounts can achieve better outcomes through increased savings rates and more diversified portfolios. They were also likely to have significantly more income in retirement.1 We’re excited to work with Schwab Retirement Plan Services to create a strategy that provides plan consultants with the flexibility and scale to reach more people and help them save for retirement.”

Since 2012, Schwab Retirement Plan Services has made managed account services available from two independent investment advisors through its retirement plan platform as the intended qualified default investment alternative (QDIA). With this QDIA approach, all plan participants are enrolled into the managed account and can choose to stay in the advice program or manage their investments on their own. “We know people need help saving for retirement. We’ve seen that when advice is built into a 401(k) plan so that participants start off with it and are free to opt out, 87 percent remained in the advice program.2 That can significantly impact retirement outcomes,” Anderson noted.

The success of this QDIA approach and discussions with employers and consultants who advise on plan investments led Schwab Retirement Plan Services and Morningstar to develop and integrate the necessary technology and participant support services for this new capability. “Now employers seeking managed accounts customized for their plan have a new choice. We anticipate the first 401(k) plan will implement this approach early next year,” Anderson said. Advisor managed accounts offer broad investment flexibility and with this new capability portfolios can include index and actively managed mutual funds, collective trust funds, or exchange-traded funds.

The participant experience

“This is a game changer for employers who want to apply the investment management capabilities of their plan advisor to support participants. Some consultants have built custom target-date funds or custom risk-based funds tailored to a specific plan, but employers understand those are still largely one-size-fits-all solutions that fail to use important individualized information about each participant,” Anderson added.

Now, in their fiduciary role as investment managers, plan advisors can create customized plan-level portfolios based on their investment and plan expertise. They also determine the participant portfolio assignment methodology for each plan they serve. Morningstar’s technology platform will analyze each participant’s individual information and, using the investment manager’s instructions, assign each participant a specific portfolio created by the investment manager. Participant portfolio assignments typically will be based on 10 or more distinct data points including age, salary, savings rate and account balance. Portfolio assignments are evaluated on a quarterly basis through the technology platform and participants may have their portfolios rebalanced or adjusted as appropriate.

Participants can also share additional details about their financial situation, such as retirement assets outside the plan or a spouse’s retirement savings, to further refine their investment strategy. They can do so through an interactive website and over the phone with a Schwab advice associate who can help them input information online to generate the managed account recommendation. In either case, the recommendations are those of the investment manager and are clearly presented as such. “The consultant achieves tremendous scale by leveraging Schwab Retirement Plan Services’ participant service and recordkeeping capabilities and Morningstar’s technology. Consultants can even be involved in the development and delivery of participant education programs if they choose. It’s a completely integrated participant experience,” Anderson said.

This new service is available for retirement plans with assets of at least $20 million.

Retirement plan consultants who want to learn more should call the Schwab Retirement Plan Services Consultant Support Center at 877-783-4372 or visit the consultant website.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

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Disclosures:

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

Schwab Retirement Plan Services, Inc., Schwab Retirement Plan Services Company, and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Brokerage products and services are offered by Charles Schwab & Co., Inc. (Member SIPC). Trust, custody, and deposit products and services are available through Charles Schwab Bank. Schwab Retirement Plan Services, Inc. and Schwab Retirement Plan Services Company (collectively, Schwab Retirement Plan Services) provide recordkeeping and related services with respect to retirement plans. (0915-5945)

Morningstar Associates, LLC is a registered investment advisor and part of the Morningstar Investment Management group.

All advisory services (including the managed account portfolios) are provided by an independent registered investment advisor (“Advisor”), using the managed account technology services of Morningstar Associates, LLC (Morningstar), a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. Morningstar is not affiliated with the Advisor. Neither the Advisor nor Morningstar is affiliated with or an agent of Schwab Retirement Plan Services, Inc. (SRPS) or any of its affiliates (collectively Charles Schwab). Charles Schwab does not supervise, make recommendations with respect to, or take responsibility for monitoring the services provided to the Plan, Plan Sponsor or to participants by the Advisor. Schwab Advice Associates, who are not employees of the Advisor or Morningstar may facilitate participant access to the advisory services of the Advisor but do not provide investment advice or recommendations with respect to the advisory services. Charles Schwab is not a fiduciary or investment advisor with respect to these services under ERISA, as amended, the Investment Advisors Act of 1940 or other law, rule or regulation and does not recommend or endorse the Advisor. There is no guarantee a participant's savings and investment strategy will provide adequate income at or through their retirement. Fees are charged by SRPS for the recordkeeping and related services it provides, and fees may also be charged by the Advisor for its provision of the advisory services. The investment alternatives have been selected by an applicable plan fiduciary specifically for use in developing the managed account portfolios. Other investment options may be available in the core lineup that are not included in the managed account portfolios. For a complete list of the investments which are available in the plan, and any associated fees, a participant can visit workplace.schwab.com, click on Statements and Reports and view the latest annual Fee and Investment Notice and any subsequent Change Notices. Participants should carefully consider information contained in the materials furnished at their employer's direction regarding the recordkeeping services provided by SRPS, and its affiliates, and the advisory services provided by the Advisor, including information regarding compensation, affiliations and potential conflicts. Morningstar provides a savings rate recommendation as part of the managed account technology services it provides to the Advisor. For plans that do not include a salary deferral feature, a savings rate recommendation will not be included.

1 Based on findings from “The Impact of Expert Guidance on Participant Savings and Investment Behaviors,” David Blanchett, Morningstar Investment Management group, 2014.

2 Results are as of August 31, 2015, and are based on 113 plans using built-in independent professional advice as the qualified default investment alternative (QDIA). This plan approach provides participants with a retirement savings and investment strategy, a major component of which is a discretionary investment management service furnished by independent registered investment advisors GuidedChoice Asset Management, Inc.® ("GuidedChoice") or Morningstar Associates, LLC, a wholly owned subsidiary of Morningstar, Inc. Plan sponsors may select either investment advisor to provide the managed account service. GuidedChoice and Morningstar Associates are not affiliated with or agents of Schwab Retirement Plan Services, Inc.; Charles Schwab & Co., Inc., a federally registered investment advisor; or their affiliates. There is no guarantee a participant's savings and investment strategy will provide adequate income at or through their retirement. Fees are charged for the managed account service, including its discretionary investment management service, based on the participant's account balance.

©2015 Schwab Retirement Plan Services, Inc. All rights reserved.

Contact:

Charles Schwab
Mike Peterson, 330-908-4334
mike.peterson@schwab.com
or
Intermarket Communications
Neil Shapiro, 212-754-5423
nshapiro@intermarket.com
or
Morningstar
Alexa Auerbach, 312-696-6481
alexa.auerbach@morningstar.com

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