According to the paper by Julie Agnew, managed accounts tend to be attractive to individuals across most demographic groups, including sex, employment tenure and full-time/part-time status. While salary is related to the probability of being a managed accounts user, the effect of salary is less compared to its influence on the probability of being an online user.
Higher salaried workers tend to be more online advice users. The average salary for managed account users was approximately $28,000 compared to $41,000 for online users, according to the paper. The average salary for non-users of advice was $19,583.
The online advice user group also tended to be made up of more full-time employees and more males than the managed account group.
Other findings of the study for the paper showed that individuals who invest in lifestyle funds show a predisposition to seek advice or help, and are more likely to use both types of advice offerings. Finally, although a causal relationship could not be determined, the paper said trading activity is higher for those using the online advice system compared to those who do nothing.
Agnew suggests that the finding that a predisposition to seek advice proxied for by investment in lifestyle funds suggests that plan sponsors may be able to identify “interested” and “reluctant” investors by studying their current asset allocations.
Agnew examined data from Financial Engines and Hewitt Associates as they related to a Fortune 100 company’s 401(k) plan. Her sample of 63,385 individuals consisted of active 401(k) participants who received a personal evaluation letter from Financial Engines. The mailing invited the participants to join the new managed account service. Approximately six months after the personal evaluation mailing, 24% of the participants used one of the advisory services. Thirteen percent used online advice and 11% had enrolled in managed accounts.
“This research is a first step in understanding who uses different advisory services. Future research will investigate how asset allocations and trading are ultimately effected by the use of these products,” Agnew said.
The working paper can be downloaded from here .
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