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Fiduciary Duty and Investment Advice: Attitudes of 401(k) and 403(b) Participants

This AARP survey of 401(k) and 403(b) participants examines a range of issues related to investment advice available to plan participants from the financial institutions that manage their plan (the “plan provider”) with a particular focus on reactions to the fact that such advice is typically not held to a “fiduciary” standard, meaning that the advice offered by plan providers to individual plan participants is generally not required to be in the best interest of the plan participants.    

Because 401(k) and 403(b) participants may choose to roll over their balances into IRAs when leaving an employer or upon retiring, the survey also examines concerns about the fact that IRA management is not held to a fiduciary standard.

Some of the survey’s key findings are as follows:

  • More than nine in ten (93%) respondents indicate that they would favor requiring plan providers to give advice that is in the best interest of plan participants.  Nearly as many (89%) favor requiring plan providers to explain, prior to giving advice, if the advice is not required to be in the best interest of plan participants.
  • More than three in four (77%) respondents indicate that they are concerned by the fact that investment advice from plan providers is not required to be in the best interest of individual plan participants. Fewer—yet still a majority (62%)—describe themselves as concerned by the fact that their plan provider can give advice to plan participants while making money from their investment selections.
  • Before reading a statement explaining that investment advice from plan providers is not required to be in the best interest of individual plan participants, just over nine in ten (93%) plan participants indicated that they either “completely” or “somewhat” trust their plan provider to manage their 401(k) or 403(b) investments in their best interest, while nearly as many (87%) respondents said that they trust their plan provider to give them investment advice that is in their best interest.
  • After reading that advice from plan providers is not required to be in the best interest of plan participants, half (50%) of respondents indicate that this information makes them “less likely” to trust their 401(k) or 403(b) provider for advice while just over one in three (37%) indicated that it has “no impact” on their level of trust.
  • When asked to indicate whether they would prefer to receive advice about their 401(k) or 403(b) plan from someone that may make money from their investments or no investment advice at all, reactions are mixed.  Almost four in ten (39%) said that they would choose “advice from someone that may make money from the investments I choose,” but nearly as many (31%) indicated that they would choose “no investment advice at all.”  Another three in ten (29%) indicated that they “don’t know” which they would choose.
  • Approximately eight in ten (81%) respondents agree that it is important to get investment advice about their retirement from an independent advisor who does not earn money based on their investments.
  • Fewer than four in ten (36%) respondents would trust the advice from an advisor who is not required by law to provide advice that is in their best interest.
  • On the topic of rollover IRAs, just over nine in ten (91%) favor requiring IRA providers to manage IRAs in the best interest of account holders.    

The survey was administered online from May 24, 2013, to May 31, 2013, by GfK Custom Research to its national KnowledgePanel, a probability-based web panel designed to be representative of the U.S. population.  The findings are based on 1,425 adults ages 25+ who currently have money saved in a 401(k) or 403(b) plan.  For more information, please contact S. Kathi Brown at skbrown@aarp.org.  Members of the media should contact AARP’s Media Relations Department at (202) 434-2560.


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