Data & Research June 23, 2015

Investor Confidence at 7-Year High

Retired and non-retired investors equally confident, a Wells Fargo/Gallup survey finds.
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U.S. investor confidence reached a seven-year high in the second quarter, with the Wells Fargo/Gallup Investor and Retirement Optimism Index registering +70 in May. The index had a baseline score of +124 when it was launched in October 1996. It peaked at +178 in January 2000, at the height of the dot-com boom, and hit a low of -64 in February 2009 following the Great Recession.

This quarter, confidence among retired and non-retired investors was nearly neck and neck, with the index registering +67 for retirees and +70 for non-retired investors.

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More than two-thirds (69%) of non-retired investors say they have a formal financial plan to reach their retirement goals, with roughly half that (36%) saying it is a written plan, up from 2011 when less than a quarter had a written plan. Nearly three-fourths (74%) of non-retirees with a written plan said they developed it with the help of an investment adviser.

Retirees are only a bit more diligent about their retirement plan, with 73% having a financial plan and 43% having a written financial plan. Retirees are also more likely to stick closely to what is in their plan than non-retirees (63% vs. 48%).

The majority of both retirees and non-retirees are highly or somewhat confident that their plan will succeed in helping them reach their financial goals, with 94% of retirees agreeing with this statement and 89% of non-retirees concurring.

NEXT: Online tools sought in partnership with working with an adviser.

When it comes to accessing financial advice, the majority of investors value access to online investing tools (71%) as well as a strong relationship with a financial adviser (70%). However, when asked to rank the three financial resources most important to them, a strong relationship with a financial adviser came in first, cited by 50%, followed by online tools (24%) and on-call access to a financial adviser (9%).

Asked about their ideal financial advice format, most investors would like a blended approach that includes both advisory and online input, but respondents were split in their preferred adviser/tool ratio. Four in 10 (39%) want the focus to be mostly on working with the adviser, with the online component added on, while 26% want the emphasis to be on the online tools, with working with the adviser as secondary to that. Less than one-quarter (23%) want their financial advice exclusively with a financial adviser, and just 9% want it entirely online.

“Technology is constantly evolving and changing how investors want to interact with their financial services firm,” says Mary Mack, president of Wells Fargo. “Through this data, investors are telling us they truly value a personal relationship with an adviser, who also uses technology in a collaborative way.”

Asked about five possible financial worries, investors are most concerned about identity theft (cited by 57%), followed by cyber-attacks on their savings or investment accounts (47%), stock market volatility (42%), investment fraud (41%), and financial abuse or exploitation of older family members or friends (32%). In fact, 32% of investors know an elderly person who has been the victim of financial abuse, and 47% say they are very or somewhat likely to work with a financial adviser to protect themselves or elderly family members.

“Over the past three years, we’ve been seeing reports of such abuse coming in from our advisers, and, unfortunately, we expect to see that growth continue as our population ages,” Mack says. “Financial firms must take an active role in raising awareness and preventing elder fraud and financial abuse, including expanding training and guidance for clients.”
Products June 23, 2015

S.F. Firm Rolls Out Simplified 401(k) Solution

ForUsAll has created a simple and inexpensive 401(k) product for small businesses with 3(16) and 3(38) fiduciary services.
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A new 401(k) solution from ForUsAll offers 3(16) and a 3(38) fiduciary services, allowing the firm to do most of the administrative work for the plan, including filling in the Form 5500, which it reviews, signs and submits for the owner, according to David Ramirez, chief investment officer for ForUsAll. The firm’s 401(k) plugs into most existing payroll providers, Ramirez says, letting plan sponsors delegate day-to-day responsibility for plan administration.

ForUsAll auto-enrolls eligible employees at a rate of 6%, which increases automatically 1% each year until the plan participant is saving at 15%. Plan participants are invested in age-appropriate target-date funds (TDFs). “As in most auto design 401(k)s, they can opt out or change the default,” Ramirez tells PLANADVISER, “but it is a best-in-class plan design.”

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Current savings rates of ForUsAll participants average about 10%, according to Ramirez, who declined to say how many participants are enrolled or the number of plans using the solution.

A 401(k) can run efficiently without an army of experts or high fees, Ramirez contends, noting that automated features make the product less expensive, which also means more money for employees. “Promising early results have been consistent in companies ranging from high-tech start-ups, to manufacturing companies, to hair salons,” Ramirez says.

The solution’s automated adviser, DAVE, is not an acronym but is named for the co-founder, Dave Boudreau; Ramirez explains plan participants can interact with DAVE for explanations of plan options and help in customizing their 401(k). “It takes about two or three minutes on the phone or on their computer,” he says.

Features include payroll integration and full-service plan administration. ForUsAll links with each employer’s cloud-based payroll system to deduct 401(k) contributions automatically, and add new employees when they become eligible. The firm’s automated system handles plan administration, including signing and submitting all retirement-related government forms. Employers have online access to a plan dashboard that provides plan status at a glance and the “Fiduciary Vault,” which organizes and secures critical plan documents.

The monthly cost for a small employer is $94, which covers the first 10 employees. At 10 to 40 employees, the price rises by $5 per employee per month, and the fee for more than 40 employees is $3 per employee per month. Plan sponsors typically pay the cost of the plan, Ramirez says. All-in plan fees for the participants at .55% cover the costs of the mutual fund, the adviser and the custodian. The plan does not charge any setup fees.

More information is on ForUsAll’s website.

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