Remote workers invest differently from local workers in 401(k) plans, and are much likelier to be interested in a personalized advice option such as managed accounts, according to a new white paper from Morningstar Investment Management.
Morningstar researchers used a novel dataset comprising 39 401(k) plans and 115,657 participants to classify plan participants as “local” and “remote” and identify differences in the usage of the plan default investment — a target date fund — and opt-in managed accounts.
They found that remote employees are 7.4% less likely to use the plan default investment in TDFs, and 1.3% more likely to use managed accounts, seeking personalized advice.
According to the paper, some of the differences can be explained by the demographics of remote workers, who tend to have higher incomes and so are less likely to use the default investment. Still, based on past Morningstar research, the effects persist even after controlling for demographics.
The paper said research shows that participants who use managed accounts tend to save more for retirement, both when the service is offered as an opt-in and an opt-out. But the savings improvements are significantly higher for opt-in because opt-in participants will generally actively receive savings-rates advice.