Press Release

Press Release

Enron Has Little Effect on 401k Participants' View of Company Stock

Boston, MA -- April 25, 2002 -- A new study released today by Boston Research Group indicates that despite a high level of awareness of the Enron situation, very few 401k participants who hold company stock in their retirement account have decreased their holdings in company stock. Furthermore, only a small minority feel they are taking substantial risk or are uncomfortable with their investment in their company's stock. These are the key conclusions of a nationwide telephone survey conducted in mid-April 2002 of one-hundred 401k participants who have held company stock in their 401k account prior to and since the Enron case was announced. (The sample has a maximum sampling error or +/- 9.8 percentage points)

"Virtually all the respondents in our study are aware of the Enron situation, but only one-in-eight has since reduced their company stock holdings." said Warren Cormier, President of Boston Research Group. The results also show that only one-in-four 401k participants feel less comfortable about their company stock holdings as a result of the Enron case.

Specifically, the average 401k participant who invests in their company stock has 30% of their 401k assets in company stock, with one-third of participants holding more than 50% of their assets in company stock. But despite these high concentrations of company stock holdings, 85% are "comfortable" with their position. "It is important that three-in-four participants feel that their company stock carries the same or less risk than a tech mutual fund. Furthermore, half feel their company stock carries the same or less risk than a money market fund, and one-third of 401k participants feel their company stock is as or less risky than a government bond fund."

When asked what they considered to be a safe or prudent percentage of their 401k assets in their company stock, two-in-three said 15% or higher, with half saying 25% or higher. "These findings are particularly interesting in that the survey was taken during a prolonged downturn in the market. Two years ago, the findings might be far more favorable toward company stock." In fact, today, more than half the 401k participants agree that they invested in their company stock because it is a low risk investment.

"These findings suggest that the Enron case has more value as a news story than as a practical lesson in diversification. Many participants are investing with their hearts and not their heads. In fact, more than half the participants agree that they invested in company stock to show loyalty to their company. Without doubt, many don't understand the relative risks of investing in one stock, despite years of employee education on diversification."

Boston Research Group

Boston Research Group (BRG) is a leader in defined contribution market research and consulting providing services to the nation's leading DC providers. BRG is best known for its syndicated defined contribution research projects that measure plan sponsors' and plan participants' satisfaction and loyalty to their plan administrator.

Within the defined contribution industry sector, BRG conducts projects that deal with both strategic and tactical marketing issues, including loyalty and satisfaction, market segmentation, brand assessment, product development, sales processes, and channel migration and distribution strategies. This work focuses on applying market research information, collected and analyzed using a range of state-of-the-art techniques and methodologies, to provide solutions for marketing-related challenges in the defined contribution industry.

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