All defined contribution plan participants are allowed to use their DC plan provider to manage their non-plan assets. Participants do not often take advantage of this opportunity, but it is available to DC plan participants.
While many investors like having more than one advisor in order to compare performance and to maintain some personal control over who manages their assets, it is not unheard of for a plan participant to use the same advisor for their assets in the plan and assets outside of the plan.
“While there are DC plan participants for whom their employee-sponsored plan is their only investment, most of them use an advisor to manage assets outside of their DC plan,’’ said Spectrem president George H. Walper Jr. “Using their plan provider to manage their outside assets could make some decisions and conversations easier as they reflect on decisions that will affect their retirement.”
Here are the nuts and bolts of the matter: 58 percent of DC plan participants use a financial advisor. Older participants are more likely to use an advisor, as are males. But in all segments of participants, at least 50 percent use an advisor, meaning they have assets that they invest.
Of those plan participants who use an advisor, only 18 percent use their DC plan provider to manage at least some of their outside assets. Of those participants, a significant majority are those with a DC plan balance above $350,000. Surprisingly, 57 percent of them are female; not surprisingly, two-thirds of them are in the older segment of 52 years of age and over.
So there is a population of plan participants who use their plan provider to manage some of their outside assets. But the study shows that those providers do not manage a great percentage of a plan participants outside assets.
On average, those participants who use their provider to manage outside assets turn over 25 percent of their non-retirement assets to that provider. Interestingly, the plan participants who have less than $100,000 in their DC account turn over the highest percentage of their outside assets to their provider.
The opportunity exists for plan providers to work with plan participants on assets outside of the plan. The benefits to the investor include the opportunity to sync their retirement intentions; the defined contribution assets can be seen as part of a comprehensive retirement package prepared by the provider.
The opportunity for the plan providers is an obvious one, to manage those assets outside of the plan. Property maintenance of those assets could lead to a growing relationship with the plan participant, and the possibility that the plan participant might spread the word about the opportunity to work with the provider outside of the plan.