Friends and family provide all sorts of support in life, and defined contribution plan participants use close acquaintances and relatives to find a financial advisor, according to the Spectrem Group report.
In the study Advisor Usage Among DC Plan Participants, 36% of 401(k) participants found their financial advisor through a referral from a friend or family member. No other specific method for finding an advisor garnered more than 9% of the responses, although ‘other’ was selected by 26% of participants.
Nine percent of participants found their advisor through a website that provides detailed information on advisors, and 7% found their advisor at a seminar or special event.
Other ways advisors were found was through a general advertisement (6%), investigating a certain product and finding an advisor that specialized in that product (6%) or the advisor made first contact (6%).
Overall, only 33% of 401(k) plan participants use a financial advisor for any investment decisions.
There were some significant differences in how certain segments of plan participants found their advisor. For instance, 44% of female participants used a referral from friends and family to just 27% of males.
The male population was more likely to find their advisor through a website (13% male to 5% female).
Among plan participants with a balance of over US$100,000, 43% found their advisor through a friend or family referral. But 43% of those with a balance below US$10,000 had some other unspecified way to find their advisor. Twenty percent of participants with a balance between US$10,000 and US$49,000 found their advisor on a website that provides information on advisors.
Ninety-four percent of plan participants considered honesty and trustworthiness to be a key characteristic of the advisor they chose. Eighty-nine percent selected the investment track record of the advisor as a significant component, and 89% said transparency and a willingness to keep the participant informed of what they are doing were factors in choosing an advisor.