By Cyril Tuohy
As many as 61 percent of workers participating in 401(k) plans want personalized investment advice to help them allocate their savings, and only 32 percent of participants expressed confidence that they are making the right 401(k) investment choices, according to a new survey.
Nearly half (46 percent) of survey respondents don’t believe they know what their best investment options are and 34 percent feel stressed over optimizing the allocation of their 401(k) dollars, the survey also found.
“Getting more workers engaged in professional 401(k) advice should be a top priority for employers,” said Steve Anderson, head of Schwab Retirement Plan Services, which commissioned the survey. “We’ve seen the positive impact it can have on both behaviors and outcomes.”
The survey also revealed that 52 percent respondents find 401(k) plan explanations more confusing than health care benefits plan explanations. Only 48 percent of respondents found their health benefits explanations more confusing.
Separate retirement surveys also have shown that, the more access to financial advice that plan participants are given, the more likely they are to make better investment decisions. With advice, participants also feel better prepared about their retirement because of how they are investing today.
Schwab participants who took advantage of third-party, professional 401(k) advice increased their savings rates and were better diversified, Anderson also said in a statement.
The research, conducted by Koski Research on behalf of Schwab Retirement Plan Services, surveyed 1,004 U.S. 401(k) plan participants. Respondents were not asked to indicate whether they had accounts with Schwab.
The survey also found that 89 percent of plan participants are counting on themselves, not the government, for financial help after they stop working full time.
With plan participants feeling unsure about where to invest, advisor groups note that there is a need for professional advice among the nation’s corporate retirement plans.
National Association of Insurance and Financial Advisors (NAIFA) reiterated its call for the U.S. Department of Labor (DOL) to “move cautiously” with regard to proposing a rule that could restrict access to advisers and raise prices on investment products.
The DOL is reviewing whether financial advisers must meet a higher “fiduciary standard” when advising clients. Advisors are currently held to a lower “suitability standard” of advice.
More than $3.5 trillion were held in 401(k) plans at the end of last year, according to the Investment Company Institute.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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