Fidelity Strengthens 401k Platform For Financial Advisors
BOSTON, MA, August 29, 2006 -- Fidelity Investments® today announced a series of enhancements to its popular Advisor 401k platform that focus on three key elements of plan performance: participation rates, deferral rates and asset allocation. Among these enhancements are the addition of Retirement Education Consultants, an automatic enrollment service and the Retirement Plan Review, a tool to help plan sponsors benchmark plan performance each year.
Fidelity also reported that total record-kept assets in the Fidelity Advisor 401k program reached a new high during the first half of 2006. As of June 30, 2006, total record-kept assets were $14.5 billion, a 21 percent increase from $12 billion in June of 2005.
"The enhancements to our advisor-delivered 401k plan, in addition to the Pension Protection Act of 2006 passed by Congress and recently signed by the President, puts plan sponsors and their advisors in an even better position to address the components of plan performance, while at the same time help millions of Americans increase their retirement readiness," said David Liebrock, executive vice president, Fidelity Investments Institutional Services Company, Inc.
Automatic enrollment, retirement education help improve plan participation
The Fidelity Advisor 401k program offers a new automatic enrollment service that allows employers to adopt a feature which automatically enrolls eligible participants in the plan. Through this feature, plan sponsors are able to automatically enroll employees in their workplace retirement savings plan, unless employees specifically opt out. Fidelity found that in 2005, participation rates for automatic-enrollment (AE) eligible employees in 401k programs were 22 percentage points higher in plans with AE, when compared to plans without AE.
Also new to the Advisor 401k platform are Fidelity's experienced Retirement Education Consultants. This team of skilled professionals can provide onsite initial enrollment meetings or online workshops to help educate employees on the benefits of their plan and motivate them to participate and increase their deferrals.
Retirement checkup, annual increase can help increase deferral rates
Fidelity released a new Retirement Checkup as part of its first|PERSON participant communication and education program. For eligible plans, the new tool provides employees with an annual snapshot of their financial situation that shows them how their current retirement strategy is likely to impact available assets at retirement. Checklists and hypothetical illustrations further help employees determine if they are on track to achieve their retirement savings goals.
The tool's illustrations result from running a minimum of 250 hypothetical market simulations. The market return data used to generate the illustration is intended to provide you with a general idea of how asset mixes have performed historically. Our analysis assumes a level of diversity within each asset class consistent with a market index benchmark that may differ from the diversity of your own portfolio.
IMPORTANT: The projections or other information generated by Fidelity's Retirement Checkup regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.
To help participants save more for retirement, Fidelity introduced an annual increase program (AIP) in 2005. AIP automatically increases a participant's deferral contribution rate by a pre-determined percentage that participants have selected on an annual basis, which is particularly effective in helping them keep pace with savings as their salaries grow. Since being introduced, approximately 42 percent of Fidelity's advisor-delivered 401k plans have implemented AIP.
Fidelity Advisor Freedom Fund Cash Conversion, Retirement Plan Review can help improve asset allocation
Research has concluded that 91.5 percent of the variability of a portfolio's performance is determined by asset allocation decisions. This can mean that investment choice is a key to plan optimization. While many plan sponsors have increased the number of investment options they offer, selecting the type of investments to balance risk and growth remains a challenge for many participants. According to Fidelity, 83 percent of 401k plans serviced by the firm in 2005 offered at least one lifecycle fund option, which can help participants by providing age-based diversification within a single "fund of funds." This is up from 2004 when 78 percent of plans offered such a fund.
To help plan sponsors address participant asset allocation, Fidelity introduced the Fidelity Advisor Freedom Fund Cash Conversion service. With this optional service, participants who do not select an investment mix of their own prior to the completion of the conversion at Fidelity are automatically invested in the Fidelity Advisor Freedom Fund that most closely aligns with their retirement date (based on their birth date), as directed by the plan sponsor.
Fidelity's Retirement Plan Review (RPR) helps advisors work with plan sponsors to benchmark the components of plan performance and measure whether they are successful in helping participants prepare for retirement. RPR provides comprehensive data such as plan-level cumulative returns, participation rates, deferral rates and asset allocation, to help advisors maintain an ongoing dialog with their clients about plan goals and achieving their objectives.
Fidelity also introduced two new diagnostic tools, a Personal Rate of Return Chart and Equity Percentage Chart. These resources are designed to provide plan sponsors with greater insight into two key indicators of retirement readiness: investment performance and age appropriate equity allocation.
"We have seen significant interest in our new auto-features and we only expect that interest to grow thanks to the Pension Protection Act," said Liebrock. "By continuing to enhance our platform, Fidelity is helping advisors strengthen their competitive offering by providing them access to the investment products, technology, insight and world class service they need to help plan sponsors design a plan that fulfills their employees' retirement goals and their company's plan objectives.
About Fidelity Investments Institutional Services Company
Fidelity Investments Institutional Services Company provides investment management services through investment professionals at financial institutions nationwide, including wirehouses, regional and independent broker/dealers, banks, trust companies and insurance companies. The company offers Fidelity Advisor Funds®, Variable Insurance Product (VIP) Portfolios, institutional money market funds and a comprehensive line of retirement products and services. Fidelity Investments Institutional Services Company's total assets under management were more than $231 billion as of June 30, 2006. For more information, advisors may visit https://advisor.fidelity.com.
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