SURVEY SAYS: Are the Markets Moving Your Participants?
This week I asked readers what, if anything, you are hearing from participants – and what, if anything you are hearing from providers/advisers.
While a plurality ( 38.5% ) was hearing from not many, but some – a significant minority ( 6.2% ) said “my phone hasn’t stopped ringing,” and nearly 11% said they were “having a hard time getting work done.” Still, nearly a quarter ( 23.1% ) said they hadn’t heard anything (yet), and nearly as many (21.5%) said they hadn’t heard much from participants (though, as one reader noted, “Our employees are pretty savvy, so I’m not surprised that I’m not hearing anything from them.” Another reader observed, “The main concern seems to be whether the vendor (and manager for many of our DC funds) is covered by some insurance (SIPC specifically mentioned) that guarantees plan assets can’t disappear. Not due to market swings, but due to vendor going bankrupt.”
“Stay the course” was the most common message to participants – according to 56.9% of this week’s survey respondents, while more than one-in-five ( 22.4% ) said they were not telling participants anything (yet). One reader noted, “We asked our provider to address the topic of market volatility at our upcoming annual 401k employee meetings. In advance, they sent out a mailing explaining that participants’ accounts are not FIDC insured and that our Guaranteed Income Fund investment is part of their general account and therefore subject to their creditors. The plan was to have employees come to the meetings with any questions. I know the letters went out, because that’s all employees are talking about today……….. all the worst-case scenario ways in which they can lose their money. I am doing my best to explain that nothing has changed and there is no reason to panic or make any rash decisions.”
One-in-eight ( 12.1% ) said they weren’t telling participants much, while 5.2% said they really hadn’t had the opportunity to tell participants anything – and the rest – well, they were “waiting for someone to tell ME what to do.” As one noted, “Nope, this has all left me speechless.” Several commented along the lines of the reader who observed simply, “Can’t tell them what to do.”
As for the words of advice/counsel coming to plan sponsors from their advisers and providers, "stay the course" was cited by more than half ( 55.9% ), but nearly 14% said they hadn't heard much, and nearly a quarter ( 23.7% ) said they hadn't heard anything (yet). About 2% said they were "still waiting (patiently)" for some word - while one-in-twenty said they were 'still waiting (not so patiently)." One reader noted, "We initiated the calls, only one responded." Still, as one reader said, "I hope to go a day without talking to them:)!"
There are other things going on, of course - one reader said, "We are Houston based, I am sure participants are thinking more about food, shelter, food, and fuel then they are their portfolios......... at least for the moment."
On the provider side, "We are tracking how many clients call to say "The second great depression is coming soon!" It's 39 and counting!"
One reader commented from the "midst" of their annual employee education meetings (ironically titled "How to Survive Volatile Markets") notes that, while she was expecting attendance to be up that "If it turns out that w/the markets doing what they have been doing the past months let alone this week have resulted in MUCH LOWER attendance at our meetings as well as no phone calls/emails." She asks - "Do any of your gurus have any ideas on how we might find out why?" Please email suggestions/comments to me atnevin.adams@plansponsor.com).
Some of my favorite verbatims were:
"I have a statement that I prepared in conjunction with my attorney....you know the one, everything is fine but I can't tell you everything is fine."
"I heard one well respected, local advisor say that his best advice to clients is "don't open your 3rd quarter statement".
"Am working with external counsel on what to say (that's going nowhere fast)"
"I have a statement that I prepared in conjunction with my attorney....you know the one, everything is fine but I can't tell you everything is fine."
"We have a lot of employees nearing retirement, and they are joking that we will be here "with walkers"!"
"Talk about nervous...I'm retiring in 42 days. what are the chances of market recovery by then?"
"Hopefully the results of this survey will provide me some support for a communication."
But this week's Editor's Choice goes to the reader who said, "Sorry I was late responding, but I had people calling and emailing me about the markets and their 401k's, and I was busy trying to get an email out to quell the fire."
Thanks to everyone who participated in our survey!
| Participants are asking about their exposure to some of the firms declaring bankruptcy, esp. Lehman. |
| Worried about accounts over $100,000 -- are they insured? |
| N/A - luckily I don't have direct contact with parts |
| Most are asking if their 401(k) account is safe. |
| Our plan is with ING. A few have asked if ING is affected by the turmoil. |
| Many worried about the safety of the promised Plan benefits during this tough time. |
| One person stopped by on Monday to ask if his 401k investments were FDIC insured. The next day same person stopped by to ask if I was doing anything to move my own 401k investments around. (P.S. This person is a property investment professional with our firm.) |
| Since our retirement plan is with AIG Retirement, I believe I have talked to all 550 associates that work here. |
| Like a kid getting hurt for the first time, they're both more aware and wary. |
| Our Participant Service Center is flooded with participants wanting to transfer to Money Market. It's a shame that these participants are going to realize losses. |
| I plan on sending a communication this week |
| I received an e-mail from our provider T. Rowe Price yesterday regarding "the upheaval in the financial sector" and to remind participants "not to allow short-term losses to derail their long-term strategies" along with re-assuring us that they are a company committed to managing money and is "not a diversified financial services provider" like Merrill Lynch, Lehman Brothers, and AIG. I forwarded the message to all employees, which T. Rowe Price will post on the Participant website also. |
| This is a retirement plan. The market has ups and downs. It always has and it always will. You are in it for the long haul and right now you are buying low. |
| N/A |
| Am working with external counsel on what to say (that's going nowhere fast) |
| Tell them to call recordkeeper if they want to know specific exposures for various funds. Encourage them to "wait and see" - not have a knee-jerk reaction; remind them "buy low, sell high". |
| We always say we do not give advice on what they should do; however, we do tell them that experts generally say that now is not a good time to sell with prices so low and is a good time to buy -- if you have time to wait for the market to pick up again. |
| We're a TPA/Recordkeeper so we refer them to their advisers. |
| "We have our hand on the wheel and we are steering a safe course" |
| Mostly, I'm referring them to several articles on the web about what to do in markets like these (i.e. stay the course), basically pointing them at the "conventional wisdom" from those who know better than I. |
| I have a statement that I prepared in conjunction with my attorney....you know the one, everything is fine but I can't tell you everything is fine. |
| Don't sell - if you can't stand to wait for the market to come back, put new dollars where you (or your advisor) think they should go. |
| We're planning to give them information on what percentage of the overall 401(k) holdings are invested in Lehman Brothers, AIG, Merrill Lynch, Washington Mutual holdings. Luckily for us, these holdings are minimal. |
| Don't panic and remember that it is only a loss if you move the money before it comes back up. Investing is for the long term. |
| I FORWARDED THE MASS MUTUAL CEO'S LETTER TO EVERYONE. I LOVED THE DISCLAIMER AT THE BOTTOM. |
| Over the long run, staying diversified, and in the market, should yield the best overall performance. Having said that, I know it is difficult to 'stay the course' when we have seen 3 major down-turns in 10 years. Stable Value exists as an investment option for a reason. This might be that reason! |
| Can't tell them what to do. |
| Our advisor in thinking we might want to go more conservative. |
| We received an e-mail from our Fidelity rep emphasizing how their business is different than some of the others getting the press. Basically - not to worry and stay the course. |
| They indicated in an email yesterday, that a formal notice would be forwarded to us regarding their stable status and the volatility of the market, but I haven't seen anything yet. |
| Our advisors will come out any time to meet individually or with a group of employees about any concerns they have. They are also available to phone and email. I think we all find that comforting. |
| Provider says they will have something for us on Friday (tomorrow) |
| We initiated the calls, only one responded. |
| ING provided 4 page letter with their current bond ratings (all excellent). Also explaining that ING is not the same firm as AIG |
| Our investment analyst at our recordkeeper has had a conference call with our Investment Committee discussing each fund in 401(k) plan and the exposures to "headline" companies as well as financial sector generally. Excellent review - we know just where the risks are. |
| We are not "dumping" anything. What goes down will come back up, and we will be around to watch the rise again. |
| I know it's good sense...but it sure is hard to swallow when you're hoping to retire in a few years. |
| Our plan provider is Merrill, and they've told us that their servicing of Retirement Plans will not change with the BOA acquisition. |
| Our adviser prepared an email after Monday's close that could only be understood by the nerdiest of financial nerds (that doesn't include me). I forwarded it to our participants anyway. I received two replies of "huh?" and one "thank you for forwarding these to us." I presume the other 397 employees simply deleted it and forgotten all about it by now. |
| Hoping to hear from my 401k provider with a set of FAQs to pass along to employees. |
| I hope to go a day without talking to them:)! |
| We met with them this morning to discuss the situation any holdings in Lehman Brothers, Merrill Lynch, Washington Mutual and AIG and their plans to further minimize these holdings. |
| Since we are, in most cases, both the provider and the advisor, we have been telling them that retirement plans are long term (emphasizing LONG TERM). Remain calm. Your funds are safe, the market will readjust. Patience is golden right now. |
| We are actively talking to our investment managers |
| Just got a blurb on our intranet yesterday about staying the course with what you have in the plan and keeping up contributions at the same pace because prices dropping lets you buy more shares benefitting you when the market rebounds. |
| Our employees are pretty savvy, so I'm not surprised that I'm not hearing anything from them. |
| It's unfortunate, but typical, that the greed of a few coupled with political mismanagement is causing a lot of financial pain throughout the world. This crisis has been a long time in building, and it will take a long time to complete the cycle. |
| We have a lot of employees nearing retirement, and they are joking that we will be here "with walkers"! |
| #1 Question has been, "Is my 401(k) protected?" And the answer is there is no explicit protection under FDIC or SPIC. However, as a recordkeeper for retirement plans, the RK's services are governed by federal law, including the Employee Retirement Income Security Act (ERISA) of 1974, which generally requires that 401(k) plan and other retirement plan assets be held in trust, segregated from employer or recordkeeper assets. As a result, were a recordkeeper or employer to face financial issues, a participant's account would be protected from creditors of the employer and the recordkeeper. Of course, retirement plan participant accounts are subject to market volatility. In particular, to the extent that the investments in a participant's account decline, the account balance will decline. |
| We asked our provder to address the topic of market volatility at our upcoming annual 401k employee meetings. In advance, they sent out a mailing explaining that participants' accounts are not FIDC insured and that our Guaranteed Income Fund investment is part of their general account and therefore subject to their creditors. The plan was to have employees come to the meetings with any questions. I know the letters went out, because that's all employees are talking about today........... all the worst-case scenario ways in which they can lose their money. I am doing my best to explain that nothing has changed and there is no reason to panic or make any rash decisions. |
| I heard one well respected, local advisor say that his best advice to clients is "don't open your 3rd quarter statement". |
| Having a hard time convincing management that we should communicate with participants....they seem to think it'll just "blow over"...in the meantime phone hasn't stopped ringing, participants are scared to death, spouses call screaming that we don't know what we are doing...threatening to sue...all that good stuff. |
| We are tracking how many clients call to say "The second great depression is coming soon!" It's 39 and counting! |
| Plan broker and I are brainstorming on how to explain current market conditions to encourage participants to hold fast to long term investing fundamentals. This is not a typical market correction by any means. |
| People seem a lot less concerned or offended than they have been when this has happened in the past. Back in the late 80's when a few major insurance companies (for which we did recordkeeping) went into "rehabilitation", I came into the office to find my parking lot choked with 18 wheelers - belonging to some very concerned participants. More participants seem to have an expectation that "someone is going to take care of it" this round. That's a good and bad thing. Back then, my answer would have been - "My phone hasn't stopped ringing." On a separate note, it will give us a good opportunity to see which potential leaders of our country can tell the difference between an opportunity to show a steady hand or an opportunity for a sound bite - at the expense of all of those affected folks. It also helps us to understand who can tell the difference between an economy and a market. As the comedian once said (uknown I apologize) "That's some useful information right there...." |
| In a very tough economic period, we are a very strong Country, we will make in. Thanks for your work. |
| Nope, this has all left me speechless. |
| We are Houston based, I am sure participants are thinking more about food, shelter, food, and fuel then they are their portfolios......... at least for the moment |
| Compared to the correction of 2000, it lasted 3.5 years and saw a 36% drop before it pulled out. Same math today? We could see a Dow 9000 before this one is over, and we're only one year into it! Buck up and buckle up, folks. |
| Most of our population is move to the money market. |
| I don't have exposure to clients/reps in my role, but my company did release a statement regarding our financial strength. |
| It is bad for everyone but I found it especially difficult to be contacted yesterday by a dying employee who has just lost $5,000 of his balance and is trying to plan for his family after he is gone. Any reply I came up with to his request for help and advice seemed hollow. |
| Should we insert the phrase to "neither current performance nor" before "past performance is no guarantee..." |
| TALK ABOUT NERVOUS...I'M RETIRTING IN 42 DAYS. WHAT ARE THE CHANCES OF MARKET RECOVERY BY THEN? |
| The main concern seems to be whether the vendor (and manager for many of our DC funds) is covered by some insurance (SIPC specifically mentioned) that guarantees plan assets can't disappear. Not due to market swings, but due to vendor going bankrupt. Our vendor is not a broker and SIPC doesn't apply. I requested the vendor provide an email that explains how they are not a Lehman making risky loans, etc. and to address what insurance they do have (fiduciary insurance and anything else). I think there is much confusion about companies in the news, AIG, Lehman, Merrill, etc and what they do. Also what they've done that put them at risk and why they can't seem to fix it/recover. |
| While net transfers have favored stable value and bond funds, we have noticed that, overall, people have contacted the call center and gone on-line a lot less in 2008 than in prior years. Speculation is that we don't want to see bad news if it affects us personally. |
| These are difficult times, the world-over; and barbs in times like these do not sit well. That said, I was a critic of QDIA from the outset and I still believe the QDIA was the wrong direction at the wrong time. |
| I've been in this field long enough to unfortunately see this event several times. Everyone panics, wants 100% of their money now (hardship, in-service, loans), and tries to find someone to blame when you tell them they cannot take their money from the retirement account. Next year they are back trying to find someone else to blame because they were able to get an in-service, hardship or loan and their account balance is depleted as the market returns to normal and makes gains and on top of that they may have extra taxes due. |
| I guess it's too soon for folks to realize the impact personally. Nobody's asking, not yet, anyways, but if they did I'd repeat the old mantra of staying the course, dollar cost averaging, yadda yadda yadda. All I know is, at the rate the stock market has been going for the past 8 years, I will never be able to retire! |
| Down here in southeast Texas, there is a more current disaster to deal with...when your home and possessions are literally gone, a 5-10% decline in your long term portfolio doesn't begin to make the radar of immediate concerns. |
| This should be seen as a buying opportunity to get shares of funds at a lower price. The market should correct as always and at that point you will be in position to enjoy the rewards when the DOW hits 12,000. |
| Unfortunately, our current plan is with AIG, so we have good reason to be concerned. We were already in the process of finding a new provider and this has made the decision easy. |