Most 401(k) Plan Participants Are Planning Their Retirement Without the Help of an Advisor, According to The Cerulli Report—U.S. Retirement End-Investor 2025. The international consulting firm states that there is an opportunity for recordkeepers to step in and play a larger role in guiding participants’ decisions, especially for those who do not have access to financial advice.
63% of active 401(k) plan participants, many of whom belong to the upper-middle-income segment, do not have a financial advisor, according to the study. Many of these participants would like to hire one in the future. In the meantime, 52% of active participants without an advisor from the upper-middle segment indicate that their retirement savings account provider is their primary source of retirement planning and financial advice.
“There is an opportunity for recordkeepers to establish themselves as trusted advisors during the accumulation phase, in order to retain and capture assets,” said Elizabeth Chiffer, research analyst at Cerulli, based in Boston.
“Recordkeepers must guide participants to help them determine their optimal retirement savings goal, target retirement date, or overall retirement lifestyle vision,” she added.
The development of personalized messaging that encourages participants to reassess their goals, track progress, and update their information at least once a year drives engagement and establishes a foundation for participant conversations. In addition, they can apply lessons from the benefits enrollment process to promote active decision-making by participants each year, the specialist explained.
401(k) plan participants often find retirement planning confusing and difficult. For example, fewer than 30% of active participants feel very confident in their ability to make future decisions about the decumulation phase and the tax implications of distributions without the help of an advisor. Participants seek advice in order to share the responsibility of retirement preparation and financial planning with a professional who can guide them through the process and assist with complex decisions.
Cerulli acknowledges that offering advice to participants presents significant challenges for recordkeepers. Although this may be ideal, there are innovative solutions that require less investment and should be considered by recordkeepers, advisors, and plan sponsors, such as: reconfiguring the 401(k) plan as a gateway to financial planning, engaging with participants as they consider other benefits, and helping them document their retirement plan.
“This approach and the inclusion of advisory solutions within the plan could maximize participants’ use of available financial benefits and help providers retain assets and secure future rollovers,” concluded Chiffer.
