Client Service September 5, 2019

Guiding Anxious Participants Through Rocky Markets

For advisers helping participants understand risk and volatility, offering a little reassurance can be more effective than teaching complex lessons in finance or economics.

Reported by

Amanda Umpierrez

Art by Patrick Edell

Retirement plan advisers fulfill many roles, from helping plan sponsors craft investment menus to running due diligence reports on recordkeepers and third-party administrators.

Among their most important functions, says Susan Czochara, retirement solutions practice leader at Northern Trust Asset Management, advisers can serve as teachers who offer timely guidance and reassure participants about the twin topics of risk and market volatility. And as individuals with sizable defined contribution (DC) plan balances reach and enter retirement, Czochara adds, advisers must help plan participants address the critical topic of sequence of returns risk.

For more stories like this, sign up for the PLANADVISERdash daily newsletter. 

According to Czochara, presenting historical data demonstrating the recovery periods that as a general matter always follow market corrections or downturns is one of the most effective ways to help calm down concerned participants. Advisers can also showcase the upsides of diversifying one’s portfolio and offer tailored guidance about assessing one’s risk tolerance. Guidance that is personal and recognizes individuals’ concerns and emotions will obviously be most effective.

Ed Farrington, executive vice president at Natixis, concurs, explaining how participants who feel a sense of reassurance from advisers are likelier to react well during periods of market volatility, even when they are no more knowledgeable about the mechanics of the equity markets. They are also more sanguine about other risks, including longevity, inflation and health care spending.

“The journey is going to be long and it’s going to have moments in time where participants can be scared because the market is down or they have a healthcare expenditure that looks very daunting,” Farrington says. “Much like a personal trainer in a gym, advisers can provide the assistance and training that’s needed to make the right decisions.”

For a couple retiring in their early 60’s, there is a high likelihood that at least one of them will live well into their 90’s. Therefore, the old perception that near-retirees are short-term investors, who must invest conservatively, isn’t realistic anymore. Sequence of returns risk must be considered, but few investment experts would advocate near-retirees should take all their investment risk off the table.

In fact, retirees and near-retirees need to consider growing their capital because of inflation and longevity risk. Participants who choose an excessively conservative investment approach and sit on the cash they’ve accumulated over time can end up losing critical purchasing power, or they can run out of money altogether.

“Participants may experience significant purchasing power erosion if their portfolios don’t take into account the impact of inflation,” Czochara warns.

With all this in mind, Farrington suggests advisers should talk about risk and return as part of the bigger picture.

“Advisers can speak about how these returns are part of a larger puzzle—your spending habits, your health, how much you’ve saved, whether you are taking advantages of all the vehicles you can to save more,” Farrington says. “Advisers can explain these things, and that allows them to put volatility in context.”

According to Farrington and Czochara, advisers can help put clients at ease by discussing the support they will get from federal programs such as Social Security and Medicare.

“Advisers who are knowledgeable and well equipped with tools to help their clients understand the complexities of these topics are best positioned to help them make decisions that are right for them,” Czochara adds.

It is important for advisers to grasp these topics, Farrington agrees, so that participants can understand how a near-term downturn in the market does not necessarily mean turmoil for their retirement.

You Might Also Like:

The Markets

April 8th, 2025

US Recession Talks Get Louder

A range of banks and broker/dealers have raised the specter of a U.S. recession as the April 9 tariff deadline...

Compliance

January 21st, 2025

2025 Retirement Outlook: Tax Changes, Cryptocurrency Trends and Litigation Reforms

According to experts at T. Rowe Price, plan sponsors should anticipate policy updates and possible litigation reforms in 2025.

Data & Research

January 17th, 2025

Strategies for Enhancing Portfolio Management

According to the Carson Group, investors are leveraging equity factors like momentum and low volatility and adopting active fixed-income strategies.

Deals & People September 3, 2019

Advisers Giving Back: Teaching Financial Literacy

Barbara Delaney, a principal at StoneStreet Renaissance LLC, teaches high school girls how to handle money.

Reported by

Lee Barney

Art by Joel Kimmel

For Barbara Delaney, who grew up watching her dad serve on the police force in the nearby Bronx, giving back to that community is a natural. And to do so, she taps her own natural bent for wanting to help people with their finances.

For the past year, Delaney, a principal at StoneStreet Renaissance LLC, has volunteered to teach financial literacy in that northernmost borough, at the all-girls’ Aquinas High School.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters. 

She says she was chatting with her old college roommate, now principal at the school, and this inspired her to want to teach the students money skills. New York is one of 42 states that don’t require high schools to teach financial literacy, she notes.

The result of her inspiration was a one-hour elective class, for juniors and seniors, that takes place in a shifting schedule between one and three days a week, in which she covers budgeting, understanding credit card debt, getting a job, choosing a college major, and related topics. It has been fulfilling for both herself and her students, she says.

She also uses the opportunity, to tell them about and recommend her field. Delaney says she decided to teach the class in an all-girls school because there are so few female financial advisers.

The girls have expressed great interest in what she does as a retirement plan adviser, so she explains how StoneStreet Renaissance, headquartered in Pearl River, New York, helps participants plan for their future. “I talk to them about what we do every day and the impact we have on people’s lives,” she says. “I also tell them how being a retirement plan adviser is a meaningful career and encourage them to consider it for themselves.”

She says her students have been receptive to her instruction and that, in fact, several have expressed an interest in joining the industry. She even took the class to visit the New York Stock Exchange to give them insight into how Wall Street works and says this was eye-opening for the girls.

She says at first, they seemed a little intimidated by her. “I told them that I also am from New York and that my father was a police officer in the Bronx,” she says. “Once they learned nothing was handed to me, they began looking up to me and became more receptive.”

Delaney says she is looking into expanding the class to other high schools in the area and that her colleague, Ellen Lander, has expressed interest in teaching financial literacy to high school students as well. She says she also believes strongly that financial literacy should be a required class in all high schools and that, perhaps with her and others beginning to teach it, more schools might fall in line.