Investors Rely on 401(k) Providers the Most for Financial Advice

When it comes to advice and support on how to achieve lifetime financial goals, a solid majority of respondents across all generations look to their 401(k) provider as their primary resource, new survey results show.

According to a T. Rowe Price study of current workers, 64% say they rely “a great deal” or “somewhat” for financial advice from their 401(k) provider, including advice for financial decisions not related to retirement. Among the workers who say they turn first to their 401(k) plan provider, the largest group is Millennials (68%), followed by Gen Xers (66%) and Baby Boomers (55%).

Tools, calculators and educational materials available through a workplace retirement plan also received high marks from 56% of respondents who say they rely on these sources a great deal or somewhat. Millennials, not surprisingly, led this group with 61%.

In addition, since 2017, the need for advice has risen for the majority of the financial objectives listed in the study. Perhaps not surprisingly, three of the most cited objectives for which respondents identified a need were related to retirement:

  • saving for retirement outside of your workplace plan (74%);
  • saving to fund health care expenses in retirement (74%); and
  • saving for retirement through current workplace plans (71%).

When it comes to saving for retirement through their current 401(k) or other workplace retirement plans, respondents cited advice on “figuring out how much to save” (33%) and “tracking progress and making changes as necessary” (32%) as the most useful in achieving the objective.

Yet, even while the need for financial advice apparently has increased, 60% of respondents are not receiving financial advice, with 43% citing cost as the primary reason, followed by “don’t need help, can do it on my own” (30%) and “too little money to manage” (30%).

Simplicity

Ease of use and accessibility for financial advice appeared to be among the leading delivery preferences among the generations. Millennials prefer advice that is accessible on their mobile devices, Generation X wants advice services that fit into their busy schedules, while Baby Boomers cite ease of use as their primary concern.

“While the 401(k) provider is universally where individuals look for financial advice, the preferences for how advice is delivered seems to differ across the generations,” notes Sudipto Banerjee, senior manager of thought leadership at T. Rowe Price. “Millennials view digital tools and calculators as an important aspect of advice delivery, while Generation X and Baby Boomers look for convenience and accessibility as they accumulate assets. While these preferences seem to differ widely at a glance, they share a common theme: simplicity. People need financial advice and they want it at their fingertips.”

Conducted by NMG Consulting from July 24-Aug. 14, 2018, the study, “Retirement Savings and Spending: Behaviors and Attitudes toward Financial Advice,” is based on an online survey of 3,005 adults age 21 and older who have never retired and are currently contributing to a 401(k) plan or are eligible to contribute and have an account balance of at least $1,000.

Fewer Investors ‘Going Solo’

A separate study by Hearts & Wallets on retail investors finds that the use of paid investment professionals is growing as a source of advice for consumers even as technology use continues to increase.

The report, “Advice & Technology: Beyond Traditional Market Models, Receptivity to Professional Advice and Mobile Payments Connection,” suggests that consumers are less likely to “go solo” in their decision-making for saving and investing, and are using multiple sources of advice and information.

An examination by Hearts & Wallets that crosses consumer preference for decision-making by behaviors finds that 86% of consumers use three or more sources for investment information and advice, up 13 percentage points since 2012.

In addition, the use of paid investment professionals continues to grow, with 46% of consumers using this source to some degree in 2018, up 3 percentage points since 2017. Another 66% of consumers use other financial professionals to some degree. Two variables influencing the use of paid investment professionals are the level of investable assets and the charging of flat fees, the report notes.

Online Resources

Not surprisingly, the use of online resources is most common with younger consumers and the more affluent, with 73% of consumers under age 44 and more than 6 out of 10 consumers with $500,000 or more in investable assets relying on online advice.

Mobile use also continues to grow as a source of advice and information. For the first time, consumers age 21 to 27 perform, on average, the same number of activities on a mobile device as they do on a computer. What’s more, for the first time since 2011, mobile has overtaken computers as the preferred device for saving and investing among consumers age 21 to 27. With this group, 68% now use mobile devices compared to 62% who use computers, the report shows.

Even with the growth of online resources, nearly half of consumers (47%) are using a “hybrid” approach of both online and advisors, up 4 percentage points in one year. This group includes more than 80% of consumers under age 35 with $100,000 in investable assets and consumers ages 35 to 44 with $500,000 in investable assets.

The report is drawn from the Hearts & Wallets Investor Quantitative Database, which contains over 45,000 U.S. households.

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