Advisers Can Help Plan Participants Keep the Faith

A Spectrem Group research report said at the beginning of 2007 64% of participants were confident their personal finances would be better in 12 months. Asked the same question in May 2007, Spectrem reported 55% expressed the same confidence level about their personal finances within a 12-month period.
Plan sponsors and financial advisers may choose to ride this trend out, or they can view it as another opportunity to offer more encompassing financial education and advisement to a group that can wield significant financial influence, Spectrem said. Asserted Spectrem researchers: “This is just a blip on their radar and advisers can help them realize it, using this opportunity to build their confidence up again.”

Demographic Trends

Spectrem research found a positive correlation between the size of a participant’s account balance and their level of confidence in their retirement investment strategy. In January, 77% of those surveyed who have more than $100,000 in their retirement account believed they would be better off in a year, and in May of 2007, only 52% were still sure, Spectrem said. Participants with under $10,000 invested were least confident in their retirement investing approach (21%) while those with $50,000-$99,000 and over $100,000 were significantly more secure (43% and 45%) about their retirement investment strategy.

Almost as dramatic is the decrease in confidence for participants over age 50; the Baby Boomers and their predecessors. In January 2007, 68% believed that their financial outlook would be better in a year, and then when asked again five months later, that dropped to 48%, the survey found. Boomers are putting more of their income into their retirement plan while other factors are wearing at their standard of living, like high gas prices and debt. While Boomers play retirement investment catch up, they aren’t feeling positive about their near-term financial pictures, Spectrem asserted.

Fighting Back

The company said the retirement industry is not without ways it can fight back by offering advice and service to plan participants, designed to solidify their investment strategies and keep them on track with periodic reviews.

Specifically, Spectrem said that plan providers, sponsors and advisers can recommend periodic retirement strategy reviews for plan participants. Some of this may be automated, and include periodic electronic alerts to participants, as well as the use of online tools. It should offer a clear picture and method of how participants will achieve stated goals, with periodic review.

Also, as an important part of an overall benefits package, sponsors and advisers should consider lower income and/or lower balance investors as potentially strong participants and afford them similar advisement opportunities as their higher income/ balance counterparts. Once educated on a systematic and steady approach they too can be strong investors, the report said.

The text of the report is here.