Data & Research July 16, 2025

Q2 Sees Volatile 401(k) Trading, According to Alight

The company's 401(k) Index found investors spent most of the quarter shifting funds from stocks to fixed income.

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Trading in 401(k) accounts fluctuated with stock market volatility in the second quarter of 2025, according to Alight Solutions’ June and second-quarter updates to its 401(k) index.

Retirement investors were active traders in Q2. In early April, amid tariff concerns driven by President Donald Trump’s Liberation Day announcements, investors quickly moved funds from stocks to fixed income, resulting in high trading volumes. Out of 62 trading days in the quarter, 40 (65%) recorded net trading dollars moving from equities to fixed income.

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“We saw some of the highest trading activity that we’ve seen in the history of time,” says Rob Austin, Alight’s head of thought leadership. Trading activity “was about 10 times an average day on those few days right after the market precipitously dropped.”

There were 13 days in Q2 with above-normal trading activity, only one of which took place in June. Net transfers for the quarter were 0.46% of balances.

According to the Alight index, inflows primarily included bond funds (42%), money market funds (12%) and stable value funds (11%). Outflows consisted almost entirely of target-date funds (92%), while company stock and U.S. mid-cap equity funds trailed at 6% and 2%, respectively.

June Cooldown

As Wall Street recovered from the tariff trepidations felt early in the quarter, trading cooled. Total transfers in June were only 0.11% of balances—down from 0.35% in May.

“After the market rebounds, [investors] slowly get back into equities,” Austin says. “But … with the benefit of hindsight, what happened? [Investors] sold after [the market] went down and bought after it went up, … which is the exact opposite of what should happen.”

According to Austin, only a small fraction of people make that choice. Still, they are “locking in losses” and should take a broader view, Austin says, knowing there will be ups and downs in investment markets. He recommends plan participants not allow what happens over the course of one or two days dictate an entire year of investment strategy.

On average, 0.011% of 401(k) balances were traded daily in June. Trading inflows primarily went to bonds (49%), international equity (21%) and stable value funds (12%). Meanwhile, outflows were mostly from large-cap U.S. equity (44%), mid-cap U.S. equity (17%) and small-cap U.S. equity funds (16%).

At month-end, the investments with the largest share of total balances included target-date funds, large-cap U.S. equity funds and international equity funds. Investments with the most contributions included target-date funds, large-cap U.S. equity funds and international equity funds.

“We can almost say that what happened in April is old news. We’re back to record highs in the market,” Austin says. “We know that saving for retirement is a marathon. It’s not a sprint.”

According to the index, a “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the index, equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and 2 times the average daily net activity of the preceding 12 months.

Practice Management July 16, 2025

Fee-Based Models Dominate as Advisers Respond to Shifting Client Expectations

By 2026, nearly 78% of adviser compensation is projected to come from fees.

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Asset-based fees remain the dominant compensation model for financial advisers, currently accounting for 72.4% of income, according to the “Cerulli Edge—Americas Asset and Wealth Management Edition.” That figure is projected to rise to 77.6% by 2026, as firms continue shifting away from commissions.

Pricing Strategies Shift to Meet Diverse Client Needs

Commission-based revenue has already fallen to 23% of average adviser earnings and is expected to drop further to 17% by 2026. In response, advisers are diversifying pricing models to meet a range of client needs. For instance, 16% of advisers serving clients with less than $100,000 in investable assets offer monthly subscription fees, while those working with higher-net-worth clients often charge annual or financial planning fees.

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Despite this evolution, about one-quarter of investors said they are unsure how they are being charged, according to Cerulli Associates. The report suggested that transparent, upfront conversations about fees not only build trust, but also help attract clients willing to pay for advice. Strategic partners can support advisers in identifying the right pricing models for their target markets and guide effective client communication.

The shift toward fee-based models is particularly strong within wirehouse and broker/dealer channels. Independent registered investment advisers, however, are expected to reduce their reliance on asset-based fees and lean more on financial planning and retainer-based models. Currently, 87% of advisers said that at least half of their revenue comes from fee-based accounts—a number expected to reach 97% by 2026.

“While asset-based fees are on the rise, they are not suitable in every situation,” says Andrew Blake, a Cerulli associate director of wealth management. “Alternative fee structures, such as annual or hourly fees, can provide greater flexibility in client service and a competitive advantage for firms in the fee-based business model.”

Alternative Fee Models Gain Traction

As more investors access financial education online and take greater control of their portfolios, they are also seeking lower advisory costs. To stay competitive, advisers are expanding alternative fee structures and bundling planning services into broader offerings.

Charging for financial plans is the most common nontraditional fee model—21% of advisers reported earning revenue this way. Fees for comprehensive plans vary widely, from $125 to $20,000. Adoption of this model also varies by channel: Just 3% of wirehouse advisers reported generating revenue from planning fees, compared with 38% in the insurance broker/dealer channel and 35% among independent broker/dealers.

Planning Services Justify Separate Fees

With growing demand for comprehensive advice, Cerulli Associates recommended that advisers carefully evaluate how they charge for services beyond investment management. According to the report data, practices are divided: Some bundle financial planning into their standard advisory fees, while others charge separately.

Given the time and complexity involved, many firms set high thresholds for planning clients. The average minimum asset requirement for financial planning now exceeds $662,000. In October 2024, Edward Jones rolled out a stand-alone planning service for clients with at least $250,000 in advisory program assets. This offering includes a separate agreement and fee, reinforcing the distinct value of personalized financial planning.

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