Financial Advisors Don’t Always Help with 401(k)s
Life + Money

Financial Advisors Don’t Always Help with 401(k)s


Americans who hire financial advisors typically make higher contributions to their 401(k) retirement plans than those who don’t and generally have clearer financial goals than their peers.

With that conclusion hardly seems revelatory, what is surprising is that a hefty portion of those who pay professional financial advisors for help and direction still struggle to make the best decisions about their retirement plans.

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On average, workers contribute 8.6 percent of their salaries to their 401(k) accounts, while those with financial advisors contribute 9.5 percent compared to 7.8 by those without advisors, according to a new study released Monday by Natixis Global Asset Management.

Also, 74 percent of so-called “advised participants” say they know what their 401(k) balances should be by the time they retire – compared with 54 percent of workers without advisors.

“Our research shows that Americans save for retirement when they have access to 401(k) plans and those who use advisors are typically more engaged investors,” John Hailer, CEO of Natixis Global Asset Management in the Americas and in Asia, said in a press release.

Yet 26 percent of advised participants, or one in four, are paying financial advisors to help them maximize their 401(k) plan but still don’t seem to know what their 401(k) balances should be by the time they retire. 

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Many investors are often confused about the literature, education and tools, such as retirement income calculators, that are provided to them by employers. Forty-three percent of people say their employers’ materials are difficult to understand.

Those who work with advisors are less likely to have issues with their employers’ information, but only to a certain extent. Forty-nine percent of those who don’t seek professional advice say they have issues, compared with 37 percent of those who do use advisors.

“We need to look for opportunities to expand the availability of 401(k) plans and encourage current participants to better understand their retirement income needs,” said Hailer. “Investors, plan sponsors, financial advisors and the government all have roles to play in helping to solve retirement planning challenges.”

Participants who use financial advisors are also usually better prepared to set retirement savings targets and are more engaged in planning and investment decision-making. The study found that 71 percent have spoken to their advisors about the adequate level of contributions for meeting retirement goals.

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While this is positive news, what’s more worrisome is that 29 percent of those who hire financial advisors still haven’t had this vital discussion with their advisors. They may be asking the wrong questions, or their advisors aren’t as available to them as they should be – or they should change financial advisors, period. The results were based on a survey of 1,000 respondents, of which 899 were enrolled in 401(k) plans.

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