Friends and Family Provide Advisor Recommendations to Plan Participants


Friends and family provide all sorts of support in life, and defined contribution plan participants use close acquaintances and relatives to find a financial advisor.

In the new Spectrem study Advisor Usage Among DC Plan Participants, 36 percent of 401(k) participants found their financial advisor through a referral from a friend or family member. No other specific method for finding an advisor garnered more than 9 percent of the responses, although “other’’ was selected by 26 percent of participants.

Nine percent of participants found their advisor through a website that provides detailed information on advisors, and 7 percent found their advisor at a seminar or special event. Other ways advisors were found was through a general advertisement (6 percent), investigating a certain product and finding an advisor that specialized in that product (6 percent) or the advisor made first contact (6 percent).

Overall, only 33 percent of 401(k) plan participants use a financial advisor for any investment decisions.

There were some significant differences in how certain segments of plan participants found their advisor. For instance, 44 percent of female participants used a referral from friends and family to just 27 percent of males. The male population was more likely to find their advisor through a website (13 percent male to 5 percent female).

Among plan participants with a balance of over $100,000, 43 percent found their advisor through a friend or family referral. But 43 percent of those with a balance below $10,000 had some other unspecified way to find their advisor. Twenty percent of participants with a balance between $10,000 and $49,000 found their advisor on a website that provides information on advisors.

Ninety-four percent of plan participants considered honesty and trustworthiness to be a key characteristic of the advisor they chose. Eighty-nine percent selected the investment track record of the advisor as a significant component, and 89 percent said transparency and a willingness to keep the participant informed of what they are doing were factors in choosing an advisor.