Hewitt: Advisers making inroads in 401(k) market

Despite the growing trend of employers putting their 401(k) plans on autopilot, many more are making investment advice available to plan participants, according to a Hewitt Associates survey released last week.
NOV 20, 2009
Despite the growing trend of employers putting their 401(k) plans on autopilot, many more are making investment advice available to plan participants, according to a Hewitt Associates survey released last week. Fifty percent of 401(k) plans polled by the consulting firm and record keeper offer investment advisory services to their plan participants, up from 40% in 2007, according to Hewitt's Trends and Experience in 401(k) Plans report. Of these plans that offer investment advisory services, 29% provide one-on-one financial counseling, compared with 22% that offered such counseling in 2007 and 19% in 2005. Thirty-four percent said that they offer seminars or workshops, up from 20% in 2007 and 19% in 2005.
“I think companies are recognizing that investment decisions need to be more strategic,” said Pam Hess, director of retirement research at Hewitt. Although many companies now automatically enroll employees into their plans (58%), offer automatic re-balancing (47%) and allow for auto-contribution escalations (44%) — these features are typically only offered to new employees. Also, participants always have the ability to opt out of a 401(k) plan if they are automatically enrolled, so advice is still necessary, even in plans that are on autopilot. “Most companies recognize that not everyone is going to use these features and that's where advice is important,” Ms. Hess said. This can represent a huge opportunity for financial advisers who are looking to build their businesses in the 401(k) market, she said. Another trend of which advisers should be aware is that more 401(k) plans are adding self-directed brokerage accounts, Ms. Hess said. Twenty-six percent of plans offer self-directed brokerage windows, up from 18% in 2007, according to the survey. “As companies are getting more paternalistic with their plans, they are also still trying to cater to the vocal participants who want this option,” she said. While only 3% or so of plan participants use self-directed brokerage accounts, they tend to be larger accounts — and good opportunities for financial advisers, Ms. Hess said. E-mail Jessica Toonkel Marquez at [email protected].

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