CHALK LINE – Participant Returns Benefit From Advice, New Index Shows

During that period, the average portfolio returns for six different hypothetical investors rose from 1.58% to 2.01%, compared with a 1% loss for the S&P 500. The Advisory Index provides a benchmark for participants and plan sponsors to evaluate the impact of professional investment advice on portfolio performance.

Composite Results

The index is a compilation of the resulting performance for asset allocations submitted by 33 participating advice providers. The recommendations are based on a set of 25 investment funds, applied to six different risk profiles.

Those profiles, and the resulting returns for the first six months of 2000, are:

Age 21 – 30

Moderate Portfolio: 1.59%
Aggressive Portfolio: 1.58%

Age 37 – 44

Moderate Portfolio: 1.58%
Aggressive Portfolio: 1.69%

Age 50 – 55

Moderate Portfolio: 2.04%
Aggressive Portfolio: 1.81%

While the numbers themselves offer no perspective on the relative merits of any one advice provider, they do provide a sense of the type returns typical participant asset allocation models might experience. 

Additionally, a six-month horizon is just the starting point for this evaluation. By any measure, however, the merits of any recommendations should be viewed over the long term.
 
According to CHALK 401(k) Advisory Board President Steff Chalk, “The 401(k) plan participant is required to make his or her own asset allocation decisions. The intent of the index is to establish a quantifiable benchmark composed of participating investment advisory asset allocation firms. By publishing the CHALK 401(k) Advisory Index on a semi-annual basis, 401(k) participants have the ability to track and monitor their personal investment performance results on a regular basis.”

The CHALK 401(k) Advisory Index ( www.chalk401k.com ) offers a composite return for portfolio recommendations by a number of advice-only providers. A research grant from Northern Kentucky University was awarded to Chalk to develop and publish the semi-annual 401(k) Index.

This is the first publication of the Index.

– Nevin Adams             editors@plansponsor.com