Majority of 401(k) Participants Want a Financial Advisor, Barriers Persist

Regardless of value, plan participants want them. Innovations in 401(k) plan design, like online advice, managed accounts, and target date funds, have simplified retirement planning. According to a new Financial Engines survey, employees now desire a 401(k) Advisor who is legally required to act in their best interest.

Strong Desire for an Advisor That Meets the Fiduciary Standard

When asked about the desired attributes of a financial advisor, 69 percent of participants said that it was “very important” that their financial advisor be a fiduciary. Another 18 percent said that it was “somewhat important.” Less than two percent said that their advisor being a fiduciary was “not very” or “not at all” important.

Groups who stated that an advisor’s fiduciary status was very important included investors who use target date funds (76 percent), investors not currently working with an advisor but interested in doing so (73 percent), those with assets between $100,000 and $500,000 (72 percent), and investors who already work with an advisor (70 percent).

“While technology can broaden the access people have to investment advice, we’ve found that many people value the ability to talk with a professional advisor, whether just to ask questions or to develop their retirement plan,” Kelly O’Donnell, a Financial Engines executive vice president, said in a statement. “Our survey shows that in addition to wanting more personal guidance, people feel very strongly about wanting an advisor who is on their side, placing their interests first.”

Despite Desire, Barriers Persist

Despite the desire to work with a financial advisor, the most commonly cited barriers included affordability (46 percent), believing they didn’t have enough assets to get an advisor’s attention (36 percent) or uncertainty how an advisor could help them (26 percent). Twenty-three percent of investors said that they preferred a do-it-yourself approach to handling their investments.

The Human Touch

While interest in online advisory services was strong (60 percent), it was even stronger for services that included access to financial advisors (68 percent). According to respondents, the top reasons people use financial advisors included the ability to avoid costly mistakes (44 percent), greater peace of mind or more confidence (28 percent) and the ability to further personalize financial plans and strategies (25 percent).

The financial topics of most interest to participants went beyond traditional retirement planning. According to the report, 401(k) participants are most interested in receiving help with:

  • Determining the appropriate savings rate to reach their retirement goals
  • Turning their 401(k) and retirement accounts into reliable retirement income
  • Evaluating their overall financial wellness
  • Assessing individual risk tolerance
  • Optimizing Social Security claiming strategies

“It’s easy to underestimate the power of a simple conversation with someone who listens to your concerns and can provide valuable insights and help. However this research validates our own experience about the important role advisors play in helping investors reach their goals,” said O’Donnell. “Financial Engines is committed to making our advisors even more accessible to help retirement investors better save and plan for a rewarding retirement.”

John Sullivan
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.

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