Help is on the way for workers who find it difficult to managetheir 401(k) retirement accounts.
Many employees already have free access to Internet-basedcalculators, which allow them to set savings goals, evaluate theirrisk tolerance and choose investments. But some are befuddled when itcomes to selecting specific funds or rebalancing their accounts.
A recent study by the human resources consulting firm HewittAssociates found that nearly 45 percent of workers feel they don'thave enough information to make the right investment choices, andmore than half want help in making investment decisions.
Such findings have spurred 401(k) providers to begin offeringindividual advice for workers and, in some cases, actually takingover management of workers' retirement accounts for an annual fee.
"Companies are shifting focus from offering more choice (ininvestment options) to offering more help," said Jeff Maggioncalda,president and chief executive officer of Financial Engines in PaloAlto, Calif.
The reason, he said, is that "most employees are saying, 'I don'thave the time or the expertise to do this myself.' ''
Financial Engines, best known for its online calculators, recentlyrolled out a Personal Asset Manager. Pilot runs at Motorola Inc., thetelecommunications company, and retailer J.C. Penney Co. found thatup to 18 percent of workers wanted "do-it-for-me" managed accounts,Maggioncalda said.
The new offerings are proliferating in part because of a 2002Labor Department ruling permitting companies to offer advice servicesas long as an independent firm is hired to give it. They also got aboost from the 2000-2002 market downturn, which cost unsophisticatedinvestors millions.
David Wray, president of the Profit Sharing/401(k) Council ofAmerica, a trade group based in Chicago, said that more than half ofall retirement plans have advice components, via the Internet or callcenters or in person advisers. About 11 percent were offering managedaccounts in 2002, "and this is growing very rapidly," Wray said.
Already, 401(k) providers like Fidelity Investments, AIG, MerrillLynch and Wachovia Retirement Services are offering employees accountmanagement for a fee, generally in a range of 0.3 percent to 1percent of assets per year.
Charles Schwab Retirement Plan Services last fall began offeringfree advice to participants in plans it manages.
Schwab uses GuidedChoice, an independent investment adviceservice, that workers can access on the Web at http://scs.schwab.com, through a call center or at an in-person meeting withan adviser, said Walt Bettinger, president of Charles SchwabCorporate Services. After selecting a portfolio, they also can signup for automatic rebalancing every year.
"We're seeing participants increasing their savings rates, andthey're shifting their asset allocations to something more in linewith long-term, diversified investing strategy," Bettinger said.
Not everyone is thrilled with the trend.
John Blossom, president of the Alliance Benefit Group, a firm inPeoria, Ill., that provides record keeping and investment services toretirement plans, believes the emphasis should be on better-designedplans that are easy for employees to navigate.
"What's happening now is companies looking for one-on-one advicefor poorly constructed plans," he said.
Blossom recommends that every plan include risk-based assetallocation models - ranging from aggressive portfolios investedheavily in stock funds to conservative portfolios with mostly bondfunds - that employees can adopt as is or personalize.
But others argue that employees who don't have the skills tomanage their retirement money deserve alternatives.
Timothy A. Chapman, chief executive officer of PMFM Inc. ofBogart, Ga., said that his firm started in the mid-1990s providingmanagement advice to Delta Air Lines pilots.
Chapman said an increasing number of workers are signing up formanaged accounts "because they're willing to pay to get results theyknow will be better than they can get on their own."
Copyright 2004 by Telegraph Herald, All rights Reserved.
No comments:
Post a Comment