Data & Research November 14, 2007

Fund Ownership Most Common Through Tax-deferred Accounts

About twice as many U.S. households own mutual funds through tax-deferred accounts – employer-sponsored retirement plans, IRAs, and variable annuities - as own funds outside such accounts, according to a recent report from the Investment Company Institute (ICI).
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More than 45 million U.S. households own funds through tax-deferred accounts and 22 million households own funds outside these accounts, according to the new study, “Trends in Ownership of Mutual Funds in the United States, 2007,” compiled by the Institute’s Research Department.

“Funds are also crucial to families’ retirement plans: Almost nine out of 10 fund-owning households own them through tax-deferred accounts earmarked for retirement, including IRAs and 401(k) plans,” said Sarah A. Holden, ICI’s Senior Director of Retirement and Investor Research.

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Fund ownership has grown through workplace retirement plans, largely fueled by the growing popularity of defined contribution plans. In 2007, 33 million households hold mutual funds through employer-sponsored retirement accounts, an increase from 27 million in 1998.

Overall Ownership

Almost 51 million American households – equal to 44% of all households in the United States and 88.2 million individual shareholders – own mutual funds in 2007, according to ICI data. This compares to 2006, when 49.9 million households and 87.9 million individuals held mutual funds.

Most U.S. mutual fund shareholders have moderate household incomes and are in their peak earning and saving years. About three in five U.S. households owning mutual funds have incomes between $25,000 and $99,999, and about two-thirds are headed by individuals between the ages of 35 and 64.

According to ICI, the new study reports for the first time the ownership of all U.S.-registered investment company products, including exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs). The data shows 51.4 million households, accounting for 89.6 million individuals, own funds offered by investment companies. Households owned about 84%, or $10.3 trillion, of the $12.2 trillion in assets in such funds in mid-2007.

The report is here. http://www.ici.org/pdf/fm-v16n5.pdf

Products November 14, 2007

Financial Engines Adjusts Pricing for Managed Account QDIAs

Financial Engines has introduced a new pricing schedule for organizations choosing to default existing or new participants into managed accounts.
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According to a press release, under the new pricing schedule, Financial Engines waives the managed account fee for the first $5,000 in each participant’s account when plan sponsors select managed accounts as their defined contribution plan’s Qualified Default Investment Alternative (QDIA) with auto-enrollment into the plan. The first $5,000 of a participant’s plan balance will not be subject to a management fee for as long as the participant remains in the managed accounts service.

In addition to receiving professional portfolio management, participants in a managed account program receive regular personalized communications detailing how their portfolios are doing, and have ongoing access to an investment adviser, the release said. With additional information about a participant’s outside assets, Financial Engines is able to further tailor the management of the account to the participant’s needs.

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More information is at www.financialengines.com.

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