How do 401(k) participants make decisions about their investments?  Do they use an outside advisor or do they rely upon advice provided by the plan provider?  Is it a waste of time for advisors to prospect with retirement plan participants?

A Spectrem Group survey found that participants definitely want and need the help of an advisor, but most find the information provided by their plan provider to be lacking.  About 40 percent of retirement plan participants will use an advisor to help them make decisions about their retirement plan investments as well as any outside assets they may have. 

Retirement plan participants that choose to engage an outside advisor for help with asset allocation within their retirement plan generally purchase additional products and services from that advisor.  Forty-five percent of plan participants that have an outside advisor have purchased additional products and services from that advisor within the past year.  That number increases to 67 percent for those participants that have balances in excess of $100,000.  Men are more likely to purchase additional services than women.

Additionally, plan participants who work with an outside advisor believe they have become more knowledgeable about investments because they have worked with an advisor.  Eighty-three percent of those participants working with an advisor feel they are more knowledgeable about investments.  This is an important factor in an environment in which many participants feel confused about investments.

Advisors that are seeking opportunities with plan participants need to focus on a few variables:

• Women are more likely than men to seek advice about their investment.
• Participants with larger balances are also likely to be thinking about retaining an advisor.  Generally participants with large balances either have substantial outside portfolios or they may be approaching retirement and will need rollover assistance.
• Middle aged mid-tier employees provide potential growth opportunities for advisors ready to form a relationship while they are still in wealth building mode.

Plan providers are not meeting the needs of plan participants who are seeking investment advice.  This provides numerous opportunities for advisors who are able to provide an alliance for a provider or even able to form a relationship with a plan sponsor.  Receiving adequate advice regarding retirement investments will become increasingly important in the future.