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| Why Offer Advisory Services to Retirement Plans?
The growing retirement plan market offers an ideal opportunity to increase the range of your services and the scope of your business.
The Growing 401(k)/Retirement Plan Market
The 401(k) plan is now the premier retirement savings vehicle in the U.S. with almost $2 trillion in plan assets invested by over 42 million workers(1). Indeed, two and a half years into the worst bear market since the Great Depression, 401(k) participation rates have barely slipped. Roughly 8 out of 10 workers who are eligible to participate in a 401(k) still do(2). For many of these workers, their primary asset other than their home is their 401(k) plan. This tremendous growth in 401(k) assets and participation is fueled by many factors including, the inadequacy of social security and changing demographics (aging baby boomers). However, the rise of the 401(k) is perhaps most directly attributable to a shift away from traditional or defined benefit pension plans, where employers alone are responsible for providing retirement income for their workers, to 401(k) and other defined contribution plans, where participants share in the responsibility for saving and investing for their retirement.
The Gap In Participant Investment Knowledge
While today's 401(k)/retirement plans utilize the internet and other recent advancements to offer more features and services than ever before, participants are still woefully unprepared to make informed investment decisions. According to a recent study, 36% of plan participants invest in only one fund, 19% are in only 2 funds, and 80% have never rebalanced their account(3).
For employers, this gap in investment knowledge is not without risk. High profile failures, such as Enron and Global Crossing, put even greater pressure on employers to offer sound 401(k) plans to their employees.
Demand For Unbiased Advice
The combination of these growth factors and increased stock market volatility have created a historic demand for investment advisory services. And demand is growing for financial advisors who will offer unbiased advice, with no conflicts of interest. In short, for independent advisors who have been considering the 401(k) business, there's no better time to make your move.
(1) Source: Cerulli and Associates
(2) Source: US News and World Report
(3) Source: Hewitt Associates