Participants Benefit from Advice, Survey Shows

The sampling size was small, but a recent survey found that participants who got financial advice held more funds and enjoyed a higher rate of return than those who didn’t.

The study of 401(k) participants at twelve Midwest mid-size firms conducted by Francis Investment Counsel found that participants who received financial advice held an average of 8.67 funds versus 4.98 funds for those who did not receive advice.  In addition, those who received financial advice achieved a 3-year annualized rate of return ending 6/30/10 that was an average 2.67 percentage points better than those who did not receive advice. 

Moreover, the average account balance for participants who utilized financial advice was $107,558 vs. $44,178 for those who did not.  Francis Investment Counsel LLC, a fee-only registered investment adviser (RIA), retrieved personal rate of return and number of funds held from recordkeepers, the company reported.

“This survey demonstrates that face–to-face, one-on-one advice has a meaningful impact on participant returns,” said Kelli Send, Senior Vice President of Francis Investment Counsel LLC.  “As companies seek ways to help their employees better prepare for a comfortable retirement, this study suggests offering personalized education and advice is effective.”  

The twelve Midwest mid-size firms included in the study represent more than 7,400 plan participants.  Of these, a random sampling of approximately 25% of plan participants maintaining account balances was drawn for the survey.  These individuals were split into two study groups: those who had used Francis Investment Counsel one-on-one participant advisory services and those who did not.