Advice Can Make a Difference in Rocky Market

Did advice help participants avoid panic selling in August?

Unsurprisingly, given the market slumps of August, a record number of people sought guidance by phone and online in the third quarter, according to data from Fidelity.

Fidelity managed more than 16 million online inquiries from IRA and 401(k) investors from August 23 to August 29. In a single day—Monday, August 24—Fidelity received over 160,000 phone calls from IRA and 401(k) investors, one of its busiest days on record. Customers wanted help on a range of topics: how to manage investments during periods of volatility, the pitfalls of converting to all cash and the possible reasons behind recent market drops. 

For many people, plummeting stock prices mean it’s time to hit the panic button and sell. But surprisingly, most Fidelity investors stayed the course and did not make significant changes to their asset allocation or contribution amount. Just 4.9% of 401(k) account holders changed their asset allocation in the quarter.

The quarter showed an average total 401(k) contribution amount of $2,610, a slight dip from the previous quarter’s $2,770, but consistent with the same quarter a year ago: $2,670. The average 401(k) contribution rate was 8.2%, up from 8% a year ago. IRA contributions also remained consistent, as IRA account holders contributed an average of $1,260 in the quarter, close to the average contribution amount of $1,270 in the same quarter a year ago. 

Major market volatility, whether up or down, should be viewed as an opportunity for investors to assess their overall financial wellness, says Doug Fisher, senior vice president, Fidelity Investments.

Advisers can include a review of their retirement savings and asset allocation, and even ripple out more widely to a basic assessment of financial health, including overall family spending and budgeting.

Fidelity based its analysis based on 21,400 corporate defined contribution plans and 13.6 million participants, as of September 30. These figures include the adviser-sold market, but excluding the tax-exempt market. Also excluded are non-qualified defined contribution plans and plans for Fidelity’s own employees. Fidelity’s IRA analysis is based on 6 million IRA customers.