By Debra Davis
Advisors know that they provide participants with significant help in preparing for retirement. Recent studies by the Principal Financial Group and the Pension Research Council now provide empirical data confirming this.
The Principal found that 92% of participants in DC plans who attended one-on-one meetings in 2011 agreed to take a positive action, and 80% of them completed that action. For example, one-on-one participants had deferrals rates, on average, that were 9% higher than participants who only attended a group educational meeting. Nineteen percent of one-on-one participants decided to have their contributions increase automatically, compared with only 2% of participants in group meetings. The Principal anticipates that these changes could result in 69% percent more savings at retirement based on elective deferrals alone.
Similarly, the Pension Research Council published a paper (note: free registration required) in which researchers found that on average, participants who elected to receive investment advice made fewer investment mistakes than both someone who did not receive advice and someone who automatically received advice. For example, only 4% of participants who elected to receive advice were under-diversified, while 19% of participants who elected not to receive advice and 10% who automatically received advice had this problem. Similarly, only 28% of participants who elected to receive advice had no equity, while 46% of participants who elected not to receive advice and 37% who automatically received advice had this issue.
The bottom line: Research data shows that advisors have a significant impact on the amount that workers save for retirement and on the quality of the investment choices they make.
Davis is ASPPA’s Assistant General Counsel/Director of Government Affairs.
