Retirement Plan Participants Relying Less on Advisers

Forty-one percent of retirement plan participants younger than 35 are relying less on an adviser, according to a new report from Spectrem, “Advisor Usage Among DC Plan Participants.” 

Among those 35 to 49 years old, 33% are depending less on advisers. The trend continues among older investors, although it declines to 28% for those ages 50 to 64 and to 19% for those 65 and older.

Overall, 54% of all participants use an adviser, but among this group, only 45% rely on and trust their adviser for the vast majority of their financial needs. When it comes to specialty investing, such as real estate or alternatives, 42% of participants younger than 35 use an adviser. The numbers are equally strong for the other age groups: 35 to 49 (43%), 50 to 64 (34%) and 65 and older (55%).

Asked whether they have a portion of their investments with an adviser to compare results with their own investing, 18% of those younger than 35 indicated this is a strategy they are testing. This is also true for 21% of those ages 35 to 49, 21% of those ages 50 to 64 and 27% of those 65 and older. The percentage of participants who had done most of their own investing but who are now transitioning more of their assets to advisers is 19% for those younger than 35, 15% for those ages 35 to 49, 15% for those ages 50 to 64 and 24% for those 65 and older.

The percentage of participants who said they are likely to drop or replace their adviser in the coming year fell from 11% in 2014 to 9%. Adviser communications continue to leave investors unimpressed. Excellent ratings were low for newsletters (15%), blogs (2%) and social media (2%). Forty-six percent of participants rated advisers’ blogs and 50% rated advisers’ social media activity as poor.

Of the top five reasons investors said they would fire an adviser, four were about communication and only one relates to performance. Fifty-seven percent said if their adviser did not return phone calls in a timely manner, they would consider firing them. That was followed by not returning e-mails in a timely manner (53%), not providing them with good ideas and advice (49%), not being proactive in contacting them (42%) and underperforming the overall stock market (39%).

“Providers have a significant opportunity to retain and grow their business by strengthening their engagement with plan participants,” says Spectrem President George Walper Jr. “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.”