When Plan Participants Move Assets



For many investors, the 401(k) relationship they develop from work may be their first foray into retirement funding or investment decision-making. Because it is their first provider-client relationship, there is an ease to extending that relationship beyond the 401(k) investments when the opportunity presents itself.


There is an obvious reward to firms which manage employer-sponsored accounts as well. Those firms can manage outside investments for 401(k) investors and can also be one of the first names that come to mind when that investor is ready to roll their employer-sponsored account into a contributory or rollover account once they leave the firm or retire.


Spectrem's newest study of defined contribution investors indicates the frequency of the practice and the likelihood that others will consider using their 401(k) provider for other investment funds. Communications, Digital Tools and Social Media delves into the technological uses of DC participants, but also considers their advisor usage, and the study is one of three studies Spectrem produces each year on DC participants.


One benefit of the DC Participant Insight Series is to be able to compare results from one year to the next, and from 2018 to 2019 there was a huge jump among investors with employer-sponsored retirement plans using the same provider to manage outside assets. The percentage of investors with a 401(k) or similar account who use the firm to manage those accounts for outside investing grew from 29 percent in 2018 to 38 percent in 2019. That near-10 percent increase indicates that investors are preferring to work with firms with which they already have a relationship rather than begin a new relationship with a different firm.


Interestingly, 48 percent of Gen X investors with a 401(k) use the same company that manages their employer account to service outside assets. That is a generational point which should cause advisors to take notice.


The extent to which investors turn over assets to the same company that manages their 401(k) is not 100 percent. Overall, investors who use the same company for work-related and outside assets turn over 55 percent of outside assets to the same firm. However, Millennials turn over two-thirds of their outside assets to the same firm when they choose to extend the relationship beyond their 401(k).



©2020 Spectrem Group



Keywords: defined contribution, assets, investors, advisors, Spectrem, plan participants