A new Schwab survey found that 61% of 401(k) participants feel their financial situation warrants financial advice. This figure represents a 600-basis-point jump from a year ago when 55% of those surveyed felt that way, according to Schwab’s 2024 401(K) Participant Study.
“There’s an absolute demand, an insatiable demand for financial advice, and it’s growing,” said Joseph Smolen, executive vice president of core and institutional markets with Empower, a retirement plan recordkeeping company. “Americans, specifically 401(k) participants, are seeking advice.”
Smolen mentioned the results dovetail with a similar survey Empower completed in 2023, which found that 93% of respondents felt having financial and retirement tools available on their providers’ 401(k) websites was a value-add for them.
There is tremendous demand among regular Americans for financial advice, but the majority of wealth management firms are leaving money on the table by exclusively focusing on chasing high-net-worth clients, said Brad Arends, co-founder and CEO of Intellicents, a financial advisory firm that works with both employers providing 401(k) plans and individual investors. In Arends’ view, that’s a mistake as wealth managers will eventually lose that potential business to financial services giants like Schwab and Fidelity and retirement plan recordkeepers like Empower. Fidelity, Schwab and Vanguard have been hiring hundreds of CFPs in recent years in a bid to offer financial advice to plan participants on a large scale, he noted.
Meanwhile, while there are RIAs that specialize in serving 401(k) plans (Arends’ firm was previously one of those), there is still little crossover between those firms and traditional wealth managers.
“I’ve sat at a table with a bunch of wealth managers, and none of them are in the 401(k) space in terms of providing services to the plan,” Arends noted. “They are trying to get in front of the high-net-worth and that is a crowded space today. Everybody is trying to go after those people. The huge opportunity today is not in the C-suite. The C-suite is crowded already. But who’s not being serviced are the mass affluents, the American workers. The private wealth industry doesn’t touch the mass affluent because they’ve been told forever they can’t make any money there, and that’s just plain false.”
Schwab’s study found the highest percentage of 401(k) participants who feel they would benefit from financial advice among millennials and members of Gen X, at 61% each. In addition, 58% of baby boomers and 53% of Gen Z members indicated their financial situation warranted financial advice.
Survey participants indicated they would feel significantly more confident making 401(k) investment decisions with the help of a financial professional than on their own. In addition, 55% of those surveyed said they would feel very confident in their decisions with professional help vs. 29% of those who felt the same degree of confidence in making investment decisions on their own.
Respondents also showed a strong preference for getting financial advice from a human being rather than computer-generated recommendations. Overall, 60% said they were very likely to follow financial advice from a human vs. 19% who would treat computer-generated financial advice the same way.
That corresponds to what Empower has seen in its business. “Americans are seeking advice, but they want to do so in a dual format,” Smolen said. “They will utilize an online log-in and go through some online tools, but at the end of the day, they still want a human to talk to. And I would agree that we see it generationally too, where the younger generation is taking a hybrid approach—online tools, but I still want to talk to somebody when money matters.”
The top issue 401(k) participants want help with is calculating how much money they need to save for retirement—42% pointed to this as an area where they need support. Another 40% would like specific advice on how to invest their 401(k). In addition, 39% want help with creating an income stream in retirement, 37% would like advice when it comes to figuring out at what age they can retire, and 36% want help with preparing for tax expenses in retirement.
Most frequently, the topic of discussion with 401(k) participants tends to center on whether they have enough savings to retire and whether they are saving enough money to achieve their goals, said Smolen. Other frequent issues that come up are asset allocation/portfolio construction and debt management, including student and mortgage debt, he said. Clients who are closer to retirement age also want to discuss how to spend down their nest egg.
Yet, in spite of 401(k) participants’ desire for financial advice, Schwab found that just 35% of respondents currently get their investment recommendations from professional financial advisors. The top source of advice remains 401(k) plan administrators, at 39%. In addition, 27% of respondents get their advice from friends and family, 25% from their employers, 12% from business media and 12% from their accountants. Other sources of financial advice included social media, bankers, brokers, lawyers and AI tools.
Schwab’s survey was conducted by Logical Research and was administered online between April 17 and May 3 of this year. It included 1,000 participants aged 21 through 70. All of the participants work for companies that have more than 25 employees and offer 401(k) plans. All of those surveyed contribute to the 401(k) plans offered by their company. The survey also included 100 extra 401(k) plan participants aged 21 through 27 to gauge Gen Z sentiment against those of other generations.
