Practice Management

Plugging the Advice Gap

By Tom Foster

Most of us have heard the childhood story about the little Dutch boy who, on his way to school, spied a leak in a dam as sea water trickled through it. Despite being late for school, the boy plugged the leak with his finger, stemming the flow of water until help came to make permanent repairs and prevent a much bigger problem.

The retirement savings marketplace has sprung a leak of its own.  The new MassMutual Retirement Savers Study1 shows that retirement savers who are the least likely to rely on professional financial advice are the most likely to react to short-term movements in the stock market. Call it the “advice gap,” one that needs to be plugged by financial advisors who support retirement plans.

Overall, 32 percent of Americans polled said they relied on a financial advisor to guide them in making decisions about retirement investments. While 62 percent of those ages 65 or older relied on professional money advice, only 8 percent of Millennials said they consulted a financial advisor. Women (36 percent) are also more likely to rely on an advisor than men (29 percent), the study found.

Those numbers should obviously be higher.  More worrisome was the direct correlation between the lack of professional financial guidance and the probability of reacting to short-term market movements.

Most recently, the Dow Jones Industrial average hit 21,000 on March 1, climbing nearly 3,000 points after the November election before most recently dropping down near 20,000 and then rising close to 3,000.

The study was conducted on behalf of MassMutual by PSB in March 2017 and polled 1,002 adults between the ages of 18 and 70. Of those, 450 were participating in a retirement plan.

Despite the recent volatility, 60 percent of adult Americans say they are standing pat on their retirement savings strategy, with 63 of women and 57 percent of men saying the same, according to the study.  That is certainly a positive development for long-term retirement saving strategies.

But there still remains a gap, one that Millennials were more likely than others to fall through. Only 23 percent of Millennials are maintaining their current strategy, the study found, while a third (32 percent) said they were moving more of their retirement savings into stocks and equities to benefit from future growth. A quarter of Millennials (23 percent) said they were moving more of their savings into fixed-income investments such as bonds or money market accounts as a hedge against a market correction.

One in 10 Americans admitted to being uncertain about how to invest their retirement savings, the study found. Millennials were twice as likely to be uncertain while only 1 percent of those ages 65 or older said the same.

There were a few rays of sunlight poking through the data clouds. Millennials were twice as likely as compared to the general population to rely on their employer’s educational programs and resources to guide them when investing and allocating their retirement savings. They were also more likely to gravitate towards investment strategies such as managed accounts that automatically allocate investments based on an investor’s age, risk tolerance or other factors.

Many recordkeepers have been seeing greater adoption of automatic allocation investment strategies such as target date funds and managed accounts as more employers move to automatically enrollment employees into 401(k)s and other defined contribution plans. The proliferation of these investment strategies could be the saving grace for many people as TDFs and managed accounts take away much of the guess work and uncertainty about investing for many people.

Like the little Dutch boy, advisors can step into the breach by helping educate more retirement plan participants about retirement saving and investment. Advisors can also recommend the use of TDFs and managed accounts to employers and, in the process, help more retirement savers do what’s in their best interests and encourage them stay the course until they can retire on their own terms.


E. Thomas Foster Jr. is head of strategic relationships for retirement plans for Massachusetts Mutual Life Insurance Co. (MassMutual).

1The MassMutual Retirement Savers Study,