Administration June 5, 2004

Advice Doesn't Dissuade Company Stock Investment

May 30, 2002 (PLANSPONSOR.com) - Plan sponsors are apparently helping out participants more than they may be aware, according to a new survey.

Reported by

Nevin E. Adams

In fact more than a quarter (26%) of participant respondents to a new survey by Putnam Investments say they are already getting advice from their employer. Still, employers were not among the top three sources, which included:

their 401(k) provider, 34%
friends, family or coworkers, 32%
a professional financial advisor, 27%

Professional financial advisors were identified as the single most important source of advice by 19% of respondents, while 17% identified their 401(k) providers as the preeminent advice source.

Whether as a cause – or an effect – on average, employed 401(k) investors who use professional financial advice have the highest account values at $59,200, compared with $40,000 for investors who say they receive guidance from employers or 401(k) providers.

Stock Still

That advice doesn’t appear to be leading participants away from company stock, however. Putnam notes that nearly a third of 401(k) participants have shares of their company’s stock in their retirement accounts – lots of it, in fact. Company stock makes up 38% of those participants’ portfolios, the survey found.

And while the headlines involving the Enron company stock debacle has succumbed to new ones about Andersen shredding, the continuing legislative and regulatory debate over possible changes in company stock rules doesn’t appear to have unnerved 401(k) investors either.

In fact, most aren’t in favor of the current company stock reform efforts, with more than half (57%) of company stock investors opposing any changes. Roughly a quarter are in favor of limits, according to the survey.

And no wonder – 71% of company stock investors say they’re comfortable with their level of share ownership versus 17% who admitted to be a bit nervous. Those company stock investors also hold 30% in other stocks or stock mutual funds; 17% in bonds or bond funds; and 14% in cash or money market funds.

The online poll was conducted February 21 to 26 among a nationwide sample of 1,000 respondents.