Participants in 401(k)s who get professional investment help through managed accounts, target-date funds or online advice earn higher median annual returns than those who go it alone, new research shows.
Financial Engines and Aon Hewitt reveal this finding in "Help in Defined Contribution Plans: 2006 through 2012," a study that examines the 401(k) investing behavior of 723,000 workers at 14 large U.S. employers. The report draws conclusions from seven years of data within the defined contribution plans of 14 companies, representing 723,000 individuals and more than $55 billion in plan assets.
The report shows that, on average, employees using professional investment help had median annual returns that are 3.32 percent higher, net of fees, than participants managing their own portfolios. If two participants — one securing professional assistance and the other not — both invest $10,000 at age 45, assuming both participants receive the median returns identified in the report, the assisted participant could have 79 percent more wealth at age 65 ($58,700) than the non-aided participant ($32,800), the report indicates.
"We recognize that many workers benefit from some professional assistance with their investing," explained Rob Austin, director of retirement research at Aon Hewitt. "Help can significantly impact workers' long-term savings outlook by giving them the resources they need to make smarter investment decisions. The key is to use [help] in a way that maximizes results."
