Beefing up advice options in 401(k) plans

Would you like some advice with that 401(k) plan?

Two of the leading companies in online investment advice launched initiatives this month aimed at getting more personalized financial advice to workplace retirement savers.

Betterment, a leader in the “robo-advisory” automated portfolio market for retail investors, announced plans this month for a new technology-driven offering for 401(k) plans. Meanwhile, Financial Engines – the current leader in 401(k) financial advisory services – is giving more workers access to its network of human advisers.

Robo-advisory services like Betterment have been focusing on the retail market, helping people manage their IRAs and taxable brokerage accounts. These services use algorithms to select a mix of investments based on your tolerance for risk and other preferences, and then automate the account management.

Betterment reports that its client base has more than doubled just this year to 110,000 customers. The 401(k) market is a different story than IRAs and taxable brokerage accounts. Workplace plans have shifted dramatically toward automated account management in recent years. But most of the action has been in target-date funds.

Managed account services have not seen much traction in the market yet. Eighty-six percent of plan sponsors pick TDFs as their default option for participants who do not make investment elections on their own, according to a survey by Towers Watson; managed account services make up just 3 percent of default plan sponsor choices.

Learn more at Reuters Money.

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