EDITORIAL: PEOPLE WHO NEED PLANNERS

Stock investments now make up 28% of American household wealth, according to a New York Times analysis of Federal Reserve data. And according to an NBC News/Wall Street Journal poll, 53% of registered voters say they own shares or mutual funds.

These dramatic increases have occurred over the past 10 years, largely driven by the advent of 401(k) retirement plans. In 1987, when the big 401(k) boom began, stocks made up only 13% of household assets.

Unfortunately, most 401(k) plan participants today are not being adequately served either by their employers or by their 401(k) plan vendors in terms of investment advice — or even basic information.

For example, most 401(k) plan sponsors provide only a minimal level of investment education for fear of stepping across the line between “education” and “advice.” Almost no plan sponsor wants to cross that line, because to do so might impose a fiduciary responsibility, and avoiding fiduciary responsibility for employee choices is a key part of the attractiveness of 401(k) plans for most sponsors.

In addition, virtually no 401(k) plan report gives employees their individual investment return figures, though one or two vendors are moving in that direction. The reports generally provide only the returns for the options each employee has chosen. The employee must calculate how his or her asset allocation across those options has performed.

Financial planners should help fill both voids.

In fact, financial planners should get more involved generally with 401(k) plans, as they make up an increasing share of family wealth.

Planners must reach out to these families — potential clients who have accumulated significant balances in their 401(k) plans — to give the investment help that employers and vendors can’t.

But even within existing client relationships there may be opportunities to help employees with their 401(k) plan investments. Have these clients invested their 401(k) assets wisely? Have they diversified properly? Have they overweighted employer stock (a common problem in 401[k] plans)? If the employees are not allowed to sell the company stock (also common), are there other investment options that may offset the risk of overexposure to employer stock? What return have the employees earned from their investments? What fees are they paying? That last bit of information will be easier to discern now that the Department of Labor is calling for more disclosure.

Without investment experience, without investment advice, what will these investors do in a bear market? Who will hold their hands to prevent ill-advised moves?

These answers are vital. Financial planners should help provide them. Soon.