25 January 2022

Personalization and Flexibility Key to Managed Account Tech Success

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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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