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Proactive Services Implementation

“A majority of participants indicated they lacked the time, knowledge, or experience to manage their own retirement investments.”
“83% of participants were interested in receiving professional investment management from their employer as part of their 401(k) plan.”
Participants who chose to manage their own portfolios invested in an average of 3.7 asset classes, compared with participants in advice-based portfolios, who invested in a minimum of 8 asset classes.
Charles Schwab, “Bridging the Gap Between 401(k) Sponsors and Participants”, 2013.

Many employers believe participants don’t save more because they can’t afford it. Studies reveal, however, the primary cause for low savings rates to be a combination of confusion and fear when facing the investment process. That confusion directly affects the number of participants who invest, how long they choose to invest, as well as what types of investments are chosen. As a result, investing over long periods of time and in a manner consistent with the participant’s evolving risk tolerance is often not the norm.

Challenge Proactive Services Solution Benefit
Not Understanding Markets In-person Education Greater Confidence in the Plan
Uninformed Target Date Fund Usage Target Date Fund Education Informed, Risk Appropriate Use
Ignoring Risk Tolerance Risk-based Managed Accounts Risk-appropriate, Greater Comfort, More Consistent Saving

For most participants, the essence of understanding the markets and investment options begins with an assessment of the particular participant’s risk tolerance. Understanding what type of risk, volatility, expectations, and time horizon are most relevant allows the participant to make educated decisions, whether in selecting from a list of core funds or target date funds. And when risk-based managed accounts are available, a participant can pursue a “do-it-for-me” solution most appropriate for him or her.

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