What it could cost to not buy advice

Employer confidence about worker retirement security took a nose dive in the past year alone. According to Aon Hewitt, a prominent HR consulting firm, 30 percent of employers were very confident their workers will retire with adequate retirement assets in 2011. That number has now plummeted to 4 percent.

Retirement accountability could be a central theme this year as more than half of responding companies report they’re going to encourage workers to take greater responsibility for their savings. But companies are also stepping up plan features like auto enrollment and auto escalation to push workers to save the right amount to match their retirement deadline.

Still, a savings-conscious participant may not be a keen investor. Employers know this and are hoping to give them more investment advisory solutions – things like online advice and modeling tools.

Employer-provided investment advice is a welcomed perk. Yet the prospect of paying more for an “add-on service” won’t appeal much to an account holder who had to tap into his 401(k) last month to pay the bills.

So here’s where the proof is in the pudding. A new Franklin Templeton survey released Thursday finds 66 percent of those who map out a retirement strategy with a financial advisor have an understanding of how much of their retirement savings they will withdraw annually in retirement. Compare that to only 36 percent who have never worked with an advisor and say they know how much they will withdraw annually. In addition, more than a third (35 percent) of those who have never worked with an advisor said they do not think about how they will approach different sources of retirement income.  

Here’s some more insight into the survey:

  • Of the respondents not using an advisor, 41 percent said it is because they don't think they have enough money to need one and 30 percent said it is because they prefer to do it themselves.
  • 38 percent who have never worked with a financial advisor say Social Security will provide the most income during retirement—twice as many as those who do work with a financial advisor (19 percent).
  • While 35 percent of respondents who have never worked with an advisor indicated that running out of money is their top concern, among those who have worked with a financial advisor (currently or in the past), that same concern fell to 24 percent.
  • 13 percent who work with a financial advisor say IRAs will provide the most income during retirement (versus only 4 percent of those who have never worked with one).

David McSpadden, senior vice president of Global Advisory Services for Franklin Templeton Investments, commented on this recent survey saying, "A large number of Americans are not currently enlisting the help of a financial advisor, in many cases because they think they don't have enough money to warrant working with one. The fact is, most Americans do want to retire at some point, but they may be missing a key resource for helping to determine how they will get there. Sitting down and discussing their concerns, plans and strategies for retirement with a financial professional is a key step towards defining and putting together a plan to reach their goals."

 

 

About the Author
Jenny Ivy

Jenny Ivy

Jenny Ivy is managing editor for BenefitsPro.com. She also covers benefits manager topics and can be reached at jivy@benefitspro.com.

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