Automating the 401(k)

Professional managers are chosen by the employer, and are restricted to investment choices within the plan. Allocation decisions are made by the manager on a discretionary basis.

Financial Engines, an online provider of investment advisory services, is a leader in this growing new space of managed accounts within retirement plans.

Companies have long used Financial Engines as a "fiduciary" to provide individualized investment advice to plan participants. Employees create secure individual profiles detailing their contribution levels, income, retirement goals and risk tolerance. The service then produces specific recommendations for diversifying investments.

Recognizing that the process, simple as it is, intimidates many employees, Financial Engines enhanced its offering to include portfolio management. That is, companies provide their services and individuals can literally turn over the decision-making process to Financial Engines professionals. It's not investment advice ... it's investment management.

According to a recent Hewitt Associates study, 7.5% of large employers are either currently offering or are planning to introduce a managed-account option to their plan participants in the coming year.

Some employers plan to include it as the default option for new hires. Others may automatically enroll existing employees in the managed-account service. (Individual employees may opt out of enrollment, of course.)