Managed Accounts — It’s Not (Just) the Allocation

 Managed accounts have been praised, criticized, and litigated — often on the theory that they’re little more than expensive target-date funds. However, a recent report actually quantifies their impact — and turns out, it’s not an investment story, it’s behavioral.

That report — inauspiciously titled “The 2026 Managed Accounts Research Series: Analyzing the Value of Managed Accounts” — was published in mid-January by Morningstar. Of course, Morningstar has a fair amount of “skin” in the managed account space — a reason, if you will, to find a favorable outcome for the design. 

And, sure enough, the analysis claims that managed accounts outperform target-date funds and the efforts of so-called “do-it-yourself” investors for — well, everyone. More specifically, the report claims that MAs increase the median wealth/salary ratio at age 65 by 5.9% for TDF investors and by 11.4% for DIY investors. Across all plan participants, adopting an MA led to an overall increase of 7.7%. Oh, and it does even better for younger participants, and lower-income individuals.

At this point, my natural cynicism kicked in — though based on my personal and significant experience working with Jack VanDerhei, one of the coauthors, over a period of decades during his long-standing tenure at the Employee Benefit Research Institute (EBRI) — well, let’s just say if Jack says something is “so,” I tend to believe him.

Following the report publication, I had an opportunity to talk with Jack (and Spencer Look, his collaborator in this effort) to better understand their model. For those who haven’t stumbled across the report, they take a significant database of actual 401(k) plan balances and activity and apply sophisticated statistical behavioral modeling techniques to project long-term outcomes based on various assumptions. While it’s not unusual for researchers to deploy statistical modelling, most suffer from a lack of actual data, not only as a baseline, but as a behavioral predictor. Which, I should add, explains (to me, anyway) why the results often don’t match up with how real people respond/react in the real world. 

All that said, this kind of modelling is also dependent on the quality of the underlying assumptions — and here none is perhaps more focused on than cost. Here the assumptions are 40 basis points cost for managed accounts (plus another 31 basis points in fund fees), 30 basis points for target-date funds, and 73 basis points for the DIY group.  Don’t like those assumptions? VanDerhei is willing to plug in different numbers.

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I also questioned whether it makes sense to model “managed accounts” generically, given the wide variation in personalization, design, and cost. Look explained that their review of roughly half a dozen managed account structures — including but not limited to Morningstar’s — showed sufficient similarity to support a generalized model. The same held true for target-date funds.

But here is the part that matters.

As important as factors like cost and asset allocation (not to mention the cost of asset allocation) are to outcomes, the report acknowledges that “…higher contribution rates are the primary driver.” The researchers further note that, “based on our analysis of the empirical data, MA users consistently save more than TDF or DIY investors, even after controlling for age, wage, tenure, and plan design features” — a pattern they say “…suggests that personalized savings-rate recommendations[i] embedded within MAs play a key role in encouraging higher savings rates.” 

While you have to go to page seven of the 19-page report to find that,[ii] to my eyes, it is the most important sentence in it.

Now, I’ve long said that while we talk about “managed accounts” as though they are a monolithic concept, they are not. There are different — in some cases, widely different — levels of personalization deployed — variations in cost and construct. Anyone who ignores these potential underlying differences in application is missing the point. 

I will admit that in considering the value of managed accounts, I had — perhaps as many of you — tended to focus more on the differences in asset allocation that might be possible if we knew more than projected retirement date — not to mention variation in the underlying costs. What I had not factored in was what the Morningstar researchers have — the application of personalization to influence and impact savings rates. 

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If managed accounts meaningfully increase savings rates — not just tweak allocations — that changes the fiduciary conversation entirely.

Because better investing matters. But saving more matters more.

• Nevin E. Adams, JD

 

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[i] It’s worth noting here that the impact is smaller, but still positive, for AE with escalation plans, with TDF investors seeing an increase of 2.7% and DIY investors seeing an increase of 7.8%. Moreover, approximately 92% of AE plans with auto-escalation show an improvement in the median projected retirement wealth for TDF investors under the MA scenario. In other words, while automated increases in salary deferrals help, those timed and personalized via the managed account platforms provide a superior result.

[ii] It IS, however, right there with the first findings. Apparently, the folks who created the executive summary didn’t view it as being as significant as I did.

Gooseneckers, Misleading Medians, and the Art of Retirement Alarmism

 Did you hear about the one that claimed an “average” American worker has less than $1,000 saved for retirement?

Well, here’s hoping you didn’t — that your day was occupied with real issues, or perhaps even better that you saw the headline, recognized it for the ludicrousocity[i] of the claim, and scrolled on without clicking, sharing, or commenting. 

But some didn’t. Drawn like a moth to a flame (or perhaps more precisely, gooseneckers at the scene of a horrific accident), some likely did click, if only to see the preposterous assumptions and/or incredulous inverse compounding applied to create such a ridiculous conclusion.

The CBS report cites “research” (and I use that term loosely here) by the National Institute on Retirement Security (NIRS) which — if one has paid attention to its previous outputs might more credibly be called the National Institute on Retirement INsecurity. I say that because the organization — which labels itself “nonpartisan” — nonetheless, and unapologetically definitely has a mission. That mission is the promotion of defined benefit plan designs — and while there’s nothing wrong with that, in the absence of good positive private sector trends to highlight there, they instead tend to find ways to bash what has become the nation’s retirement plan design alternative — the 401(k).

As for this most recent attempt,[ii] you don’t have to dig deep, or delve into footnotes to see just how data was convoluted to derive that click-bait crafted outcome. They simply took data from what appeared to be a reliable government source — though it happens to be a self-reported number of accumulated savings[iii] taken by the government — for all employed adults aged 21-64. Yes, you read that correctly.

Oh, and then picked the median of that wildly diverse range of experiences. 

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So — you take the accumulated savings of a 21-year-old — and mush it together with that of someone on the brink of retirement…. Honestly, you can stop right there, and know that this is a stupid, although ostensibly mathematically accurate, result. Seriously. You might just as well take the mid-day temperature of the Sahara Desert, the midnight temperature of Antarctica, add them together and to derive the temperature in Omaha, Nebraska. 

And yet, that’s the kind of math that is the basis for the headline. 

Then, presumably to provide some “balance,” NIRS produced a median number for those who had some retirement savings — again, though — every worker from age 21-64 — and provided a median of $40,000. 

But again, a mathematically accurate result[iv] that tells us…nothing.[v] 

To its credit, the NIRS report itself (eventually) acknowledges what actually matters: access to a workplace retirement plan, the need to address Social Security’s funding shortfall, and the drag student loan debt places on retirement readiness.

But those realities are buried beneath a click-bait headline built on a median so broad as to be meaningless. That isn’t analysis — it’s alarmism dressed up as math. And while it may generate attention, it amounts to click-bait journalism enabled by irresponsible and misleading “research.”

Don’t fall for it — and by all means, don’t spread it around.

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• Nevin E. Adams, JD

 

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[i] Yes, it’s a made-up word.

[ii] See Retirement in America: An Analysis of Retirement Preparedness Among Working-Age Americans - NIRS.

[iii] Andrew Biggs notes that in this data sampling from the Survey of Income and Program Participation (SIPP), the bottom quintile of earners have median annual earnings of just about $20,000 even for those aged 35 and over. In other words, these are people who are barely working – very few hours and weeks worked, typically at very low wages. See Does the typical American have only $955 saved for retirement?

[iv] One assumes, but considering the logic in the compilation, it may bear double-checking.

[v] The CBS report went further, of course — just in case you weren’t panicked enough, they juxtaposed the bizarre medians noted above with some generalizations about how much income you’d need in retirement, layered it in with worries about Social Security (and some exaggerated assumptions on how much/many Americans rely heavily on it), and even threw in a reference to Trump Accounts to generate even more clicks.    

Lawyers, Funds and Money

  I recently stumbled across a report that claimed a “Massive Gap Between Participant and Attorney Recoveries in ERISA Lawsuits.”

That wasn’t exactly news to me, though it was a handy quantification[i] of a subset of ERISA settlements to make the case that the per-participant recoveries in ERISA litigation pale in comparison to the 25%–33% “pay day” that the plaintiffs’ bar gets in cases where there is a settlement.

The report — by Davis & Harman — focused on 27 settlements in 2025 involving (only) underperformance and excessive fee cases. In producing their conclusion, they employed some math that was arguably a bit “squishy”[ii] — and the results are all over the board — but you didn’t need to rely on that to see — and appreciate — the huge gap between what wound up in the lawyers’ pockets versus participants.

The rationale is, of course, that class action suits can be expensive to mount and pursue. The attorneys take on these cases, investing their time, energy, and money for years (and in some cases, decades) with no offsetting compensation. And, of course, there was no tally for all the cases filed that wound up with no recovery to counterbalance that expense.

But — let’s face it — when there is a “payday” for plaintiffs’ attorneys, it nearly always dwarfs whatever recovery they win for individual participants, if only because the recovery (net of attorneys’ fees, their expenses, the compensation to named plaintiffs, and the expense of administering the recovery) gets spread among thousands, and sometimes tens of thousands, of participants[iii] (we’re nearly always talking about large plans, after all). 

Moreover, there are plenty of signs that certain firms are simply “in it” for the quick settlement “funded” by insurance money (the exhaustion of which likely incentivizes many a settlement). Little wonder that some of these firms begin their career with a personal injury focus.

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There’s an argument to be made (and, trust me, the plaintiffs’ bar makes it) that litigation — or perhaps more precisely fear of future/potential litigation — has led to any number of long-term positive outcomes for the system overall. We’re talking about lower fund expenses, special (less expensive) retirement share classes, widespread availability of collective investment trusts, a reduction in revenue-sharing practices, greater reliance on passive/index fund options, etc. And there’s merit in those outcomes, though I’d be hard-pressed to “credit” that as a goal or objective of the firms that brought litigation.

However, there is something to be said for the renewed “outside” perspective that litigation has brought to retirement plan design and administration; would the move toward less expensive fund options have occurred as rapidly as it did without all those excessive fee suits? Would we be questioning the efficacy of managed accounts? The unbridled use of participant data? Would we, even today, be reminding folks to look to their plan documents to make sure it aligns with their forfeiture reallocation procedures?

But then, there are also any number of (at least potentially) positive changes (retirement income, alternative investments, managed accounts, target-date funds as a default, and at one time even automatic enrollment) that have been held in abeyance for fear of being sued. And let’s face it — the pace of litigation has led to significantly higher insurance premiums for every retirement plan. That’s a price we all pay.[iv]

In fairness, the vast majority of retirement plans will never be confronted with a class action lawsuit — they are, quite simply, too small to attract the attention of even the greediest plaintiffs’ attorneys.

Frankly, I’ve always considered the fear of litigation to be a poor motivator of good behaviors, though there are lessons to be learned.

Litigation may grab headlines and enrich attorneys, but it’s not a retirement strategy. The real work — and the real value — comes from plan fiduciaries who understand their role, document their decisions, and act solely in participants’ best interests.

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That’s where — and how — participant outcomes are actually improved.

Not because of litigation — but in spite of it.

• Nevin E. Adams, JD

 

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[i] See Davis & Harman Survey Highlights Massive Gap Between Participant and Attorney Recoveries in ERISA Lawsuits – Davis & Harman LLP.

[ii] They compared the median of the average per-participant award to the average plaintiff’s attorney’s fees…focused only on excessive fee and underperformance suits settled in 2025.

[iii] The participant-plaintiffs named in the suits fare better, of course, with “awards” routinely coming in between $5,000 and $10,000 each, though their investment of time and reputation surely counts for something.

[iv] Settlement amounts, though not insignificant, can be just the tip of the iceberg when it comes to tallying up the cost of litigation. Rarely acknowledged is the cost in time and outside counsel required to defend against litigation, much less the enormous cost of discovery, depositions, etc., before you even get to trial. 

A Super Bowl 60 Portfolio Pick

 The Patriots and Seahawks have some Super Bowl history — and some think the outcome might have an impact on the stock market — not to mention your 401(k)! 

Yes, that’s what adherents of the so-called Super Bowl Indicator[i] would have you believe — based on a “theory” that when a team from the old National Football League wins the Super Bowl, the S&P 500 will rise, and when a team from the old American Football League prevails, stock prices will fall.

It’s a “theory” that has been found to be correct nearly 80% of the time — for roughly three-quarters of the 59 Super Bowls to date.

Not that it hasn’t been tackled short of the “goal” line…particularly in recent years.

Portfolio Prognostications

One need to look back no further than last year’s victory by the NFC/original NFL Philadelphia Eagles commanding victory over the AFC/original AFL Kansas City Chiefs to see a testament to this theory — as the S&P 500 closed up nearly 17% in 2025.

That said, you might recall the previous year’s victory by the (original AFL) Kansas City Chiefs — which, according to the Indicator, should have predicted a portfolio predicament for the S&P 500 —  but wound up with a 23% gain for the year. Or the year before that when those (same) Kansas City Chiefs prevailed over the (original NFL) 49ers — but the S&P 500 still rose 25%.

On the other hand, the year before that the victory by the (old NFL) Los Angeles Rams (over the old AFL) Cincinnati Bengals “should” have been a portent of good times, only to see the S&P 500 slump more than 19% — dare I say “sacked” for its biggest loss since 2008.

And while the previous year’s blow-out victory by the NFC’s Tampa Bay Buccaneers[ii] (over those same AFL Kansas City Chiefs) bolstered the premise behind the “theory,” the year before that the win by these same Kansas City Chiefs (who, despite a rough 2025, have become something of a regular in the big contest in recent years) over the then-NFC Champion San Francisco 49ers undermined its track record (or did your 401(k) miss that 18.4% rise in the S&P 500?).

Or how about the year before THAT when the AFC’s New England Patriots (who once upon a time were the AFL’s Boston Patriots) bested the NFC champion Los Angeles Rams — but the S&P 500 was up more than 30% that year (2019).

And then there was the year before that when a win by the (old NFL and) NFC champion Philadelphia Eagles against the AFC Champion Patriots turned out to be a loser, marketwise, with the S&P 500 down more than 6% (though for most of the year it was quite a different story). Ditto the year before, when the epic comeback by those same AFC Champion Patriots against the then-NFC champion Atlanta Falcons failed to forestall a 2017 market surge.

Now, one might think that the real “spoiler” to this market “theory” is the New England Patriots (who not so long ago were perennial Super Bowl participants — and are, of course, back this year, albeit under new “management”) — but the year before that, the AFC’s (and original AFL) Broncos’ 24-10 victory over the Carolina Panthers, who represented the NFC, also proved to be an “exception.” 

Market Makings

Indeed, one might well wonder why, in view of that consistent string of “exceptions” that we’re still talking about this “theory” — but, as it turns out, that’s an unusual (albeit consistent) break in the streak that was sustained in 2015 following Super Bowl XLIX, when the AFC’s New England Patriots (yes, they DO show up a lot — though it’s been a while) bested the Seattle Seahawks[iii] 28-24 to earn their (at the time) fourth Super Bowl title. Yes, those same Seattle Seahawks that will face those (same) New England Patriots on Sunday.

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It also “worked” in 2014, when the Seahawks bumped off the legacy AFL Denver Broncos, and in 2013, when a dramatic fourth-quarter comeback rescued a victory by the Baltimore Ravens — who, though representing the AFC, are technically a legacy NFL team via their Cleveland Browns roots (this is where things start to get confusing, as the Ravens, who were the Browns moved to Baltimore in 1995 (though the NFL still views them as an expansion team) filling the hole left by the then-Baltimore Colts’ 1984 “dead of night” move to Indianapolis.

Admittedly, the fact that the markets fared well in 2013 was hardly a true test of the Super Bowl Theory since, as it turned out, both teams in Super Bowl XLVII — those Ravens and the San Francisco 49ers (yes, they show up a lot also — they just miss Joe Montana) — were, technically, NFL legacy teams.

However, consider that in 2012 a team from the old NFL (the New York Giants) took on — and took down — one from the old AFL (the New England Patriots — yes, those New England Patriots… again). And, in fact, 2012 was a pretty good year for stocks (and people who like to see the Patriots lose in dramatic fashion).

Steel ‘Curtains’?

On the other hand, the year before that, the Pittsburgh Steelers (representing the American Football Conference, but an old NFL team) took on the National Football Conference’s Green Bay Packers —two teams that had some of the oldest, deepest and, yes, most “storied” NFL roots, with the Steelers formed in 1933 (as the Pittsburgh Pirates) and the Packers founded in 1919.

According to the Super Bowl Theory, 2011 should have been a good year for stocks (because, regardless of who won, a legacy NFL team would prevail). But as some may recall, while the Dow gained ground for the year, the S&P 500 was, well, flat (dare we say “deflated”?).

And then there was the string of Super Bowls where the contests were all between legacy NFL teams (thus, no matter who won, the markets should have risen):

• 2006, when the Steelers bested the Seattle Seahawks (yes, they’ve been here more than you might appreciate — unless you’re a Seahawks fan, anyway).
• 2007, when the Indianapolis Colts (those old Baltimore Colts) beat the Chicago Bears 29-17.
• 2009, when the Pittsburgh Steelers took on the Arizona Cardinals (who had once been the NFL’s St. Louis Cardinals); and
• 2010, when the New Orleans Saints bested the Indianapolis Colts, who, as we’ve already remarked, had roots dating back to the NFL legacy Baltimore Colts.

Sure enough, the markets were higher in each of those years.

As for 2008? Well, that was the year that the NFC’s New York Giants upended the hopes of the AFL-legacy Patriots (yes, those Patriots, and yes, those New York Giants) for a perfect season, but it didn’t do any favors for the stock market. In fact, that was the last time that the Super Bowl Theory didn’t “work” (well, until last year, the year before last — oh, and the year before that — and the year before…).

Patriot Gains

Times were better for Patriots fans in 2005, when they bested the NFC’s Philadelphia Eagles 24-21. Indeed, according to the Super Bowl Theory, the markets should have been down that year—but the S&P 500 rose – albeit just 2.55%.

Of course, Super Bowl Theory proponents would tell you that the 2002 win by the New England Patriots accurately foretold the continuation of the bear market into a third year (at the time, the first accurate result in five years). But the Patriots’ 2004 Super Bowl win against the Carolina Panthers (the one that probably nobody except Patriots fans and disappointed Panthers advocates remember because it was overshadowed by the infamous “wardrobe malfunction”) failed to anticipate a fall rally that helped push the S&P 500 to a near 9% gain that year, “sacking” the indicator for another loss (couldn’t resist).

Bronco ‘Busters’

Consider also that, despite victories by the AFL-legacy Denver Broncos in 1998 and 1999, the S&P 500 continued its winning ways, while victories by the NFL-legacy St. Louis (by way of Los Angeles) Rams (that have since returned to the City of Angels) and the Baltimore Ravens (those former “Browns”) did nothing to dispel the bear markets of 2000 and 2001, respectively.

In fact, the Super Bowl Theory “worked” 28 times between 1967 and 1997, then went 0-4 between 1998 and 2001, only to get back on track from 2002 on.

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Indeed, the Buccaneers’ move to the NFC was part of a swap with the Seattle Seahawks, who did, in fact, enter the NFL as an NFC team in 1976 but shuttled quickly over to the AFC (where they remained through 2001) before returning to the NFC.[2] And, not having entered the league until 1976, regardless of when they began, can the Seahawks truly be considered a “legacy” NFL squad?

Bear in mind as well, that in 2006, when the Seahawks (what did I tell you?) made their first Super Bowl appearance — and lost — the S&P 500 gained nearly 16%.

Some Fun Facts to Share About the Game

This is the first time the Super Bowl has ever been played on February 8. It’s a rematch of Super Bowl XLIX. Super Bowl rematches are uncommon — this will be the 10th such pairing where the same two teams have met in the big game before. Historically, rematch teams have won back-to-back about two-thirds of the time.

The New England Patriots have chosen to wear all-white uniforms — white jerseys and white pants — for the game. They had the choice as the designated home team and opted for the white combo, in which they’re undefeated this season. The Seattle Seahawks will wear their navy-blue jerseys and navy-blue pants, continuing the look they wore in their playoff wins. Which means this matchup will feature an especially striking all-white vs. all-navy contrast — something rare in Super Bowl history and highly visual for TV broadcasts.

Through the first 59 Super Bowls (up to SB LIX), the white-jersey team has won roughly ~65–70% of the time. Notwithstanding that trend, the Seahawks are (currently) favored to win.

Overall, and particularly in view of the exciting playoff games that have led up to it, it looks like it should be a good game. And that — whether you are a proponent of the Super Bowl Theory or not—would be one in which regardless of which team wins, we all do!

- Nevin E. Adams, JD

 

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[i] An alternate theory linking the Super Bowl to stock market performance in reverse fashion postulates that Wall Street’s results can be used to predict the outcome of the game. According to this theory, if the Dow rises from the end of November until Super Bowl game day, the team whose full name appears later in the alphabet will win. Some people have too much time on their hands…

[ii] “Purists” still dispute how to interpret Tampa Bay’s 2003 victory, since the Buccaneers spent their first NFL season in the AFC before moving to the NFC.

[iii] As an interesting side note, Seattle is the only team to have played in both the AFC and NFC Championship Games, having relocated from the AFC to the NFC during league realignment prior to the 2002 season. The Seahawks are the only NFL team to switch conferences twice in the post-merger era. The franchise began play in 1976 in the NFC West division but switched conferences with the Buccaneers after one season and joined the AFC West.