Today, more than one-half of plan participants seek the advice and assistance of a professional financial advisor when making investment decisions affecting their retirement plan money, compared with just one-fifth in 1996.

This increase in advisor use in the past 10 years can be attributed to two factors: the growth in the proportion of participants who have account balances of at least $100,000 (27% in 2006 compared with 9% in 1996) and the experience of the 2000-2002 bear market, when many participants saw their account balances decline.

With two exceptions, plan participants’ attitudes toward financial advisors did not change noticeably between 2000 and 2005.

In both 2000 and 2005, about 40% of plan participants said their advisors had helped them become more knowledgeable investors, and that same percentage said they had earned a higher rate of return on their investments by having used an advisor.

On the other hand, the percentage of plan participants who said their advisors had made them more comfortable with higher-risk investments declined to 24% in 2005 from 37% in 2000. It appears the bear market has had a lasting effect on participants’ interest in investments they perceive as risky.

In addition, the percentage of plan participants who expressed confidence that their advisors fully understood their objectives increased to 64% in 2005 from 54% in 2000. Again, it appears the experience of the bear market has made those participants who use advisors more conscious of the need to fully explain their objectives and circumstances to the advisors they select.

Financial advisors have made a place for themselves in the retirement plan market. A majority of plan participants want the expertise and assistance that advisors provide. The only question is whether plan providers or outside advisors eventually will control the relationships with participants’ households. At stake in the long run is the management of retirement plan assets for all household members and the potential to manage other household savings and investments.

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