By Jonathan Reuter & David P. Richardson

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.

Source @SSRN