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More 401(k) Participants Want Brokerage Option, Study Says

A growing number of 401(k) plan participants are seeking a brokerage option within their 401(k) plans, according to a soon-to-be released study conducted by Hewitt Associates of Lincolnshire, Ill.

The study, which examined 401(k) plans offered by 290 employers with asset levels of $1 million to $11.7 billion, found that 55 percent of companies that responded either offer or are considering adding a self-directed brokerage account to their plans within the next 18 months. Seventy-five percent of those cited employee demand as the determining factor behind their decision to add, or consider adding, a brokerage account option.

Conversely, mutual fund windows, defined by Hewitt as 401(k) investment options that allow participants to choose from a set list of 40 to 50 funds, are losing popularity, the study found. Only 26 percent of respondents will add, or are considering adding a mutual fund window in the next 18 months, according to the study.

However, 45 percent of the study's respondents said they would not consider adding a brokerage option to their plans, citing concerns that their employees would make poor investment choices. Some of the other reasons employers gave for not adding a brokerage option include; the likelihood of market timing (32 percent); lack of demand (26 percent) and cost concerns in adding the program (14 percent).