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.”
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.