The Impact of Expert Guidance on Participant Savings and Investment Behaviors

Participants increased their savings rates by nearly 28% after using the program, an average of 2% of their salary.²

87% of participants increased their savings rates after receiving recommendations to save more.³

Before using the program, almost half (48%) of participants in this study held three or fewer funds - suggesting participants who choose to manage their accounts themselves may not have a diversified portfolio.⁴ After using the program, the majority held six or more funds.

Participants enrolled in the program maintained their equity allocations throughout this economic cycle. Those not enrolled reduced their allocations and did not return them to their original levels, potentially missing out on market gains.⁵

A 25-year-old participant could have almost 40% more retirement income from an advice and managed accounts service with an annual fee of 0.40%. Also, there is an 89% chance of a 25-year-old using the program having more wealth in retirement.⁶

Learn more about the impact of expert guidance on participant savings and investment behaviors.

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1 A total of 58,444 participants were included in the study based on available participant information and various filters and include those that used Morningstar Associates' Morningstar ® Retirement Manager^SM Managed Accounts or Advice service between the dates of January 2006 and February 2014.

2 The average increase in saving deferral rates is determined by analyzing each participant's savings deferral rate prior to using and after using the Morningstar Retirement Manager service. The result is the average across all participants included in the study.

3 The percentage of participants that increased their savings deferral rates is determined by comparing each participant's savings deferral rate prior to and after using the Morningstar Retirement Manager service. Participants who increased their savings deferral rate after using Morningstar Retirement Manager are included in this data point.

4 For purposes of this study, “do-it-yourself” participants (those mentioned as not previously using our advice and managed accounts service) are defined as those who have an allocation of 20% or less to an investment classified as an “allocation” (such as a target-date) fund by Morningstar, Inc. prior to using Morningstar Retirement Manager. The portfolio asset allocations held by participants prior to using Morningstar Retirement Manager were classified by investment type and those meeting the definition of a “do-it-yourself” investor's portfolio were analyzed to determine number of funds held in the portfolio.

5 Average equity allocations of participants prior to using Morningstar Retirement Manager were analyzed from May 2007 to February 2014 and compared to the value of the S&P 500 Index.

6 This figure represents the likelihood that a participant could potentially have more wealth at retirement by using Morningstar Retirement Manager. This analysis is based on 58,444 participants who used the Morningstar Retirement Manager service between the dates of January 2006 and February 2014. For each participant in this universe, the hypothetical future one-year performance using the participant's portfolio prior to and after using Morningstar Retirement Manager is calculated. The difference between these results was then projected forward to the participant's assumed retirement at age 65, including an annual fee of 0.4%. Participants were categorized based on their age upon first using Morningstar Retirement Manager, and the ratio of participants in each age category who had better results after using Morningstar Retirement Manager to the total number of participants in that category was calculated to arrive at the aggregate likelihood value. For example, the analysis shows that an average 25-year-old using Morningstar Retirement Manager has an 89% likelihood of having more wealth at retirement compared to an average 25-year-old who did not use the service. The likelihood amount varies by age, and tends to decrease with the age the participant first uses the Morningstar Retirement Manager service, i.e., a 45-year-old has an 80% likelihood and a 60-year-old has a 56% likelihood of having more wealth at retirement. Additionally, the likelihood of more wealth at retirement increases as the management fee decreases; conversely, decreases as the management fee increases.