Client Service December 12, 2018

Working With Financial Professionals Better Engages K-12 403(b) Participants

Educators who work with a financial professional exhibit more effective financial behaviors over time, have higher mean annual contributions, increase their contributions more frequently, and are more likely to monitor their account performance than those who do not, a survey finds.

Reported by

Rebecca Moore

K-12 educators who work with financial professionals have better 403(b) plan outcomes and are more confident, according to a survey by AXA Equitable Life.

The K-12 403(b) market differs from other retirement plan markets in that participants often have their own investments through which they have a relationship with a financial professional, rather than all participants working with one plan adviser. The study finds there are emotional benefits to working with a financial professional, and the longer the relationship with the financial professional, the greater the benefits.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news. 

The median account balance for K-12 educators surveyed who work with a financial professional is $40,000 versus $21,000 for those who do not work with a financial professional. In addition, 88% of those who work with a financial professional are confident in having a plan for retirement in place, 64% are confident they will meet their retirement goals, and 57% are confident in the quality of their investment choices. These percentages are 82%, 56% and 42%, respectively, for those who do not work with a financial professional.

According to the survey, educators who work with a financial professional exhibit more effective financial behaviors over time. They have higher mean annual contributions ($5,016 versus $3,372 for those who do not work with a financial professional) and increase their contributions more frequently (2.6 times since starting in their retirement plan versus 2.1 times). Also, 68% of those who work with a financial professional monitor their account performance, versus 56% who do not.

As for emotional benefits, 83% of those who work with a financial professional feel the professional has important expertise about 403(b) plans, 80% feel a financial professional helps make investment decisions that are best for them and 81% feel the professional understands how the 403(b) fits into their overall plan for retirement.

Nearly two-thirds (63%) of those who do not work with a financial professional say they are somewhat or very likely to work with one in the future. The top three reasons cited are that they are getting closer to retirement (49%), to find how their 403(b) fits into their plan for retirement (46%) and they need advice about how to invest (33%).

The study was fielded in April among 1,007 respondents. More information is at https://us.axa.com/news/403b-advisor-value/.