By Cyril Tuohy
The use of advisors to dispense retirement-related advice dipped slightly in 2013 for the first time since 2007 as the stock market performed well and volatility eased, according to the Mercer Workplace Survey.
The survey found that 33 percent of employees with 401(k)s used an advisor, down from 36 percent who used an advisor in 2012. The percentage of employees using an advisor had been rising steadily since 2007, when 24 percent of 401(k) plan participants used an advisor.
“Extending a relationship tracked in these studies since 2001, overall professional advisor use declined slightly in 2013 as the stock market improved and market volatility declined,” the 2013 Mercer Workplace Survey found.
Advisors are still “far behind” plan sponsors and providers as a source of 401(k) investment information, the survey found.
But the “quality” of the employees served by advisors is very high. Those employees tend to be more highly educated, earn higher incomes, maintain higher 401(k) balances and defer at higher rates than the rest of the 401(k) population, the survey found.
The survey, conducted with Brightwork Partners, is based on results collected online from 1,506 participants contributing to their employer-sponsored 401(k) accounts and holding an account balance of at least $1,000.
The survey was conducted between May 28 and June 5 and has a margin of error of plus or minus 2.4 percent.
Since advisors already tend to serve employees who are better prepared for retirement than the entire 401(k) population as a whole, advisor-served plan participants are up to three times more likely to be “very confident” in achieving their retirement income goals, the survey found. This is compared to employees who rely on record-keepers or employers, the survey also found.
A second subset of the 401(k) population, the 15 percent who engages “in an online or in-person advice relationship,” also tends to be better educated and earn higher incomes than the rest of the 401(k) population, the survey found.
This population, younger and skewed toward males, however, is almost twice as likely as all 401(k) participants to have taken a loan or a withdrawal, the survey also found.
“However anxious, they are also engaged; they are more likely than all participants to transact in their plans and are vastly more confident than the unadvised about all aspects of their retirement planning,” the survey found.
The higher the engagement level with an advisor, the more confident 401(k) plan participants become about funding their futures.
Since 2010, the rising use of professional advisors among 401(k) participants had moved in lock-step with the climb of the Standard & Poor's 500 index. Both paths finally diverged in 2012, the survey also found.
A similar pattern emerged in 2005 when advisor use dipped relative to the previous year as the Standard & Poor's 500 index was well into a long climb that peaked in 2007 before the financial crisis, the Mercer survey showed.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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