Many Have Access to Asset-Allocation Funds, But…

A Spectrem Group research report, “Participant Asset Allocation Trends: Target Date and Lifestyle Funds,’ said that of the 59% who could choose one of the immensely popular funds:

• 14% had access to lifestyle options,
• 9% could opt for target-date portfolios, and
• 36% had both as options.

Of participants with asset-allocation option access, 39% have no money in them and 22% have invested a portion of their accounts in those choices. Of the participants that do not currently have an asset-allocation fund available to them, only 9% indicated they were “likely” to invest in them if they were made available, while 21% said they were “unlikely” to choose them. Forty one percent said they did not know.

Some 59% of participants said their whole investment approach has not changed in the last several years, while 24% have become more aggressive and 17% more conservative.

Spectrem said participants were asked to rate various fund selection criteria on a scale of importance, and the top four were:

• Fund expenses (64%),
• Past performance (60%),
• the specific companies in which the fund invests (60%), and
• the fund’s risk level (60%).

Asked to specify only one most important metric, past performance was the clear winner (41%), while the guarantee of a minimum return was second (17%). Fund expenses came in second to last at 6%.

Somewhat contradicting general industry thought, almost one-quarter (22%) of retirement plan participants say they are “very’ interested in managing their personal finances and investments, and 48% say they have “some” interest. According to the research report, only 4% of participants were “not at all’ interested.

Only 10% of participants reported they view themselves as “very knowledgeable’ about finance and investments and 51% consider themselves “somewhat knowledgeable.’ Eight percent indicated they consider themselves total novices.

A total of 400 plan participants were surveyed online during January and February 2007.