Cure Sought For Ailing 401(k) Accounts
Reports of the death of 401(k) plans are greatly exaggerated. The plans are still very much alive and well. But at the same time, they're not performing at their best because of the ongoing financial crisis, which is eroding the retirement confidence of their participants. This, in turn, is leading many participants to seek guaranteed income in retirement.

The average 401(k) investor lost one-third, or 28%, of his accumulated balances in 2008, according to Barclays Global Investors, which released the findings of a comprehensive survey at a press briefing in New York in April. The BGI-sponsored study, entitled 401(k) Participant Attitudes, Behaviors and Intentions, was based on results of a March 2009 survey by the Boston Research Group.

Among the 1,000 401(k) survey participants, 63% said their confidence in their ability to retire had declined in the past year, and 15% said they were worried they might never be able to retire. Eighty percent of the respondents indicated they lost assets in the last year. Of those who lost assets and are worried they will never be able to retire, 58% indicated they will make up for their losses by working until they die, while 41% said they will delay retirement.

"Despite this, we'd characterize the average 401(k) investor as in critical but not terminal condition," said Kristi Mitchem, head of BGI's U.S. defined contribution business, at the press briefing. Even with the dramatic market sell-off, a combination of continued savings and a return to normal conditions, she said, would bring a quick recovery for most investors.

Warren Cormier, president of the Boston Research Group and co-founder of the Behavioral Finance Forum, pointed to data indicating that one-third, or 33%, of 401(k) plan participants in the U.S. are delaying reading their statements because they are afraid of the losses. "The troubling aspect is that participants are shutting down," he said. "We know that lack of communication tends to significantly raise fear."

Another concern, he said, is that participants believe the best way to recover losses is to save more or extend their tenure in the labor market. "But it is unlikely that people will save more," Cormier said, "because they don't have the propensity to save, and they may not have the option to stay in the labor market due to forced retirement or health problems."

Much of the discussion at the press briefing centered on the need to include an income distribution phase within 401(k) plans. The group also discussed steps plan sponsors and policy-makers could take to restore the confidence of participants facing an unstable economic future. Barclays, for example, is pushing plan sponsors to adopt more annuitization programs. "Our view is that annuities should be an essential component of any retirement system because annuities allow participants to hedge against longevity risk," said Mitchem.
-By Bruce W. Fraser

Capital Analysts Debuts New Platform
In a move designed to stop treating its reps as commission-based salespeople, Capital Analysts has unveiled a new technology platform and initiated a new flat-fee business structure for its advisors, a program designed to reposition the firm in line with new realities in the business.

According to the firm's president and CEO, Matthew Lynch, those changing realities include the need to provide advisors affiliated with the firm "integrated services to run their offices via technological and operational efficiencies, empowering them to build transferable equity in their firms." The new affiliation model is called Wealth Manager Access.

The fee for firms with up to three advisors typically ranges from $40,000 to $120,000 depending on the firm's revenues. Larger firms pay more.