Why professional advice to participants matters

When surveyed, 67% of workers say they want 401(k) investment advice, yet only 12% are getting professional advice for their 401(k). [1] Today, more Plan Sponsors are making 401(k) help and guidance available to their employees. 

The difference between advice and no advice in a 401(k) portfolio

Getting professional advice for 401(k) investments can have a significant impact on retirement outcomes. According to a Morningstar study, participants that take advantage of 401(k) advice when it is offered could make a “total savings rate improvement of 2.48 percentage points, a relative increase of about 24%.”[2] So, why does professional advice matter? Because it changes behaviors and forces you to take time to think and talk about your 401(k) goals and take a look at what you could be doing better. Here are three reasons why professional advice to participants matters:

1. Take a more disciplined approach to investing

A 2010 Schwab survey noted that the vast majority of 401(k) participants (over 90%) that listened to professional advice, stayed the course in their 401(k) plans – making it easier to weather the ups and downs.[3] There is no such thing as a perfect retirement portfolio since there will always be the element of risk. A more disciplined approach to investing helps manage risk. Your advisor can help you with:

Keeping emotions in check

When the markets drop, emotions set in and participants may need to be reminded that they should stay committed to their investing strategies. One of the values of an advisor is managing those ups and downs and helping them stay on track.  

2. Portfolio construction/management

 “70% of participants who receive 401(k) advice make changes to their contribution rates – jumping on average from five percent to 10 percent of pay.” 3 Over 30 years, a 1 percent higher savings rate can result in $65,000 in additional assets, demonstrating that investor outcomes are particularly sensitive to savings rates.” [4]

Take a look at your portfolio

Make time annually to sit down with an advisor and ask the following questions: were we too aggressive? Or not enough? Advisors can help participants see how their 401(k) assets fit in with their other portfolio assets to meet their overall objectives. Advisors can also help educate and provide context behind what’s going on in the market.

Understand the impact of fees

Fees are an expected part of a 401(k) plan. Plan participants could save on average .25 percent per year (25 basis points) by switching to lower cost investments that are quantitatively very similar to those they already hold, but with a better track record.” [5] Your advisor can help you with the comparisons.


Think diversification. Creating and maintaining an appropriate diversified portfolio is important for 401(k) participants: “Control what you can control.” What CAN be controlled with some professional advice is the diversification of assets and assuming an appropriate level of risk.  Build a portfolio that addresses unique risks such as the inflation rate, interest rates, etc. and maintains adequate exposure to portfolio growth while helping to manage risk. 

3. Keep an eye on your retirement calendar

Time plays an important role in the outcome of a 401(k). The age you start your 401(k), the number of years until retirement, and let’s not forget that interest is compounded over time. A professional advisor can help you keep an eye on your retirement savings calendar and notify you when trigger dates are coming up.

Determine your retirement horizon

How many years do you want to be retired for? There are a number of tools available to help people gauge where they are – or should be, in terms of retirement. Participants that use an advisor can get help THROUGH their retirement years, not just TO retirement; making sure your money continues to work for you after you retire. 

Align target dates to individual retirement goals

Different participants will have different situations and needs, so even though their target dates may be the same, the actions needed to achieve their objectives may be quite different. Professional advisors can review allocations and retirement goals to help assess the risk profile.

When to decumulate assets

While there is a lot of focus on accumulating assets, an advisor can help you figure out the most effective way to decumulate – or when to start taking money out. Keeping in mind, when you eventually make withdrawals from a traditional defined contribution plan, you’ll have to pay income tax on the money you withdraw.

Everyone’s retirement needs will be different, that’s why professional advice to participants matters.  Simply put, personalized advice and service can result in making more informed investment decisions. Employer Retirement Investment Advisors (eRIA) investment adviser representatives that support PAi’s CoPilot retirement service plan are licensed and qualified to give true investment advice based on each participant’s situation. In addition, CoPilot offers tools to help keep participants on track to meet their retirement goals including one-on-one consultations and webinars, a years of retirement calculator, automatic investment with age-appropriate risk-based models and automatic alerts. Contact us online or give us a call to get your plan started: 800.236.7400.

* Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.


[1] www.schwab.com. 401(k) Participant Study: 2015. https://www.aboutschwab.com/images/uploads/inline/Schwab_2015_401k_survey_-_advice.jpg

[2] Blanchett, D. (2014). Morningstar Investment Management.  “The impact of expert guidance on a participant savings and investment behaviors. 

[3] www.schwab.com. Advice matters: New Charles Schwab Study Demonstrates Positive Impact of Professional Advice on 401(k) Investor Behavior. Retrieved from http://pressroom.aboutschwab.com/node/600/all/2017/all

[4] www.401kspecialistmag.com (May 2, 2017). Retrieved from: Vanguard goes low again with this important participant message. https://401kspecialistmag.com/vanguard-goes-low-again-with-this-important-participant-metric/

[5] www.401kspecialistmag.com  What an examination of 52,000 Retirement Plans Found. Retrieved from: https://401kspecialistmag.com/examination-52000-retirement-plans-found/

Paul Novitski, CPFA - Financial Services Representative – panovitski@pai.com - 800-236-7400 x3340

Paul is a subject matter expert on 401(k), retirement savings, participant advice, small business 401(k), investments, education on options.