401(k) Plan Savers Who Sought Professional Advice Had Better Returns Than Those Going It Alone
A new study provides powerful evidence of how effective professional investment advice can be, according to Aon Hewitt and Financial Engines, who conducted the study.
“Help in Defined Contribution Plans: 2006 through 2010” examines the impact of professional investment help such as target-date funds, managed accounts and online advice in eight plans with a total of 400,000 participants and $25 billion in assets.
Aon Hewitt and Financial Engines measured how participant behavior affected portfolio risk and returns between January 1, 2006 and December 31, 2010.
Participants who didn’t use any type of help were more likely to exhibit poor portfolio diversification and inappropriate risk choices. They were also more likely to overreact to market volatility by moving to cash or bonds and then missing the 2009 rally.
The study also found that baby boomers close to retirement who did not use professional help were most likely to have missed the market rally.