New Evidence on the Demand for Advice within Retirement Plans

We study demand for advice by retirement plan participants using administrative records from defined contribution retirement plans offered by 23 institutions where TIAA is the sole recordkeeper. We distinguish advice on asset allocation from advice on retirement income levels, and between participants who are and are not eligible for TIAA’s wealth management services. We find that advice seeking increases with age, account balance and annual contribution level, and is highest among those eligible for wealth management services. However, we also find persistent differences in participant engagement. Participants with web access to their account are approximately twice as likely to seek advice as those without web access. This remains true even when we instrument a new participant’s choice of web access this year with the fraction of new participants at the same institution who enabled web access last year, suggesting that providing web access by default may increase advice seeking. On the other hand, participants who invest solely through target-date funds—the dominant default investment option—are significantly less likely to seek any form of advice, even when they are approaching retirement age. Consequently, in the absence of proactive measures that cause defaulted participants to engage with their retirement plans, plan sponsors may need to develop retirement income defaults. We find that advice seeking increases around changes in marital status, but only limited evidence that it increases around investment menu changes