In an industry-by-industry comparison of 401(k) plans and their performance, financial advisory firms easily rose to the top.
Employers in the financial advice industry group ranked first in plan performance, beating 26 other industry groups on almost all performance measures, according to this year’s Judy Diamond 401(k) Benchmark report released in April.
The report evaluated 27 industry groups on six metrics of 401(k) plan performance, including average account balances, participation rates and even rates of return.
The 401(k) plans of financial advisory firms had a median rate of return of 19.2%, the highest of any industry group. They also registered the largest employer and employee contributions, drawing a median $4,296 and $11,011, respectively, for the year. In addition, they tied for first with four other industry groups in plan participation, with a 100% participation rate.
Out of a perfect overall score of 6, the plans of financial advisory firms scored 9.
"The idea behind the overall score is that lower is better," said Eric Ryles, vice president of customer solutions at Judy Diamond Associates. "It's like golf."
Ryles explained that if an industry ranks first in each of the six metrics, it would get the perfect score of 6, which none of the industry groups achieved.
The financial advice industry group nevertheless was “super No. 1,” he said because it ranked first or tied for first on all metrics except average account balances, where it came in fourth.
Employees in financial advisory firms had average account balances of $111,637 in 2023, up 14% from the year before.
The financial advice industry moved into the lead from a sixth-place finish in 2022, knocking out certified public accounts, which dominated the leaderboard two years in row.
In addition to the CPA industry, which came in second in the latest ranking with an overall score of 31, the other industries in the top five with the best-performing 401(k) plans were lawyers and legal services, financial and insurance services, and engineers, with overall scores of 35, 36 and 39, respectively.
Those in the bottom three were retail, accommodation and food services, and transportation and warehousing, with overall scores of 133, 143 and 146, respectively.
The report is based on Form 5500 disclosure forms of about 640,000 active 401(k) plans for 2023 plan year. The plans have at least $3,000 in plan assets and at least one active plan participant and cover about 74 million eligible workers with $8 trillion in assets. The report was sponsored by Mutual of America Financial Group.
