The total number of participants invested in a professionally managed allocation has more than doubled from 17% at the end of 2007, according to Vanguard’s recently released How America Saves 2013 report.
By 2017, Vanguard estimates that 55% of all participants will be entirely invested in a professionally managed investment option.
The annual report notes that in 2012, 36% of all participants in 401(k) retirement plans at Vanguard invested their plan assets in a professionally managed investment option, “dramatically improving their portfolio diversification and potentially making them more financially prepared for retirement compared with participants making investment choices on their own.”
Jean Young, co-author of How America Saves, said in a statement that “the number of participants completely turning their portfolio construction over to a professional, or obtaining advice from professionals, is an important trend in the potential future financial security of retirees. It represents a shift in responsibility for investment decision-making away from participants—many of whom may be inexperienced investors—to investment and advice programs that have been vetted by employers as part of their fiduciary obligations.”
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The study also notes that 27% of all participants in 2012 were invested in a single target-date fund, 6% held a single traditional balanced fund, and 3% used a managed account advisory program. Also, 14% of participants who were offered an investment advice service through their plan adopted one.
The report also points out that average plan account balances rose by 10% in 2012, to $86,212, which reflects both “the effect of both ongoing contributions and market returns,” Vanguard says.