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December 17, 2015 at 08:07 AM
Younger investors in employer-sponsored retirement plans are shifting away from advisors, a new Spectrem Group study shows.
According to the study, more than 40% of participants in employee-sponsored retirement savings plans who are under age 35 say they are making their own investment decisions rather than using an advisor.
Similarly, one-third of participants age 35-49 indicate similar behavior.
The report, which based on a survey of 986 individuals who participate in an employer-sponsored retirement savings plan such as a 401(k), 403(b) or 457 plan, finds that overall slightly more than half (54%) of plan participants use an advisor.
This represents an opportunity for advisors and plan providers, Spectrem President George H. Walper Jr. says.
“Providers have a significant opportunity to retain and grow their business by strengthening their engagement with plan participants,” Walper said in a statement. “As the U.S. population ages, these opportunities for engagement will only increase, since more than 30% of plan participants say they will be seeking advice on planning for long-term care, implementing tax-advantaged strategies and establishing an estate plan.”
Of the plan participants who do use an advisor, Spectrem finds that eight in 10 would prefer to work with one advisor who handles all facets of their wealth.
The report also identifies what factors are important when considering an advisor.
According to the survey, 7 in 10 consider it important that their advisor has professional registrations and designations, such as being a certified financial planner or chartered financial analyst. Across age groups, the importance placed on an advisor’s certification increases with older plan participants.
Investors also want an advisor that understands their risk.
“Three-fourths are confident that their advisor understands their appetite for risk, which is especially relevant in the handling of retirement plan assets,” the report states.
Broken down by gender, women surveyed by Spectrem consider it more important than men that their advisor understands their appetite for risk (79% vs. 72%).
