Plan Advisers Say Election ‘Noise’ Worth Addressing With Clients

The world will be watching the results of the U.S. election when they start rolling in on Tuesday.

While plan advisers will no doubt be preaching a “stay the course” mentality with both plan sponsors and participants, no matter the outcome, some of the top advisers in the field note the importance of addressing the election and its potential effects with retirement plan committees and participants.

The timing of early November, some note, can also be leveraged as a good moment to communicate about more basic retirement savings concepts. November is, after all, open enrollment season and time to plann for next year for both plan committees and individuals.

No matter the results of this week’s voting, advisers reached by PLANADVISER all stress the importance of proactive outreach and communication for clients who cannot help but think about what the election means for them.

Going Beyond Clichés

John O’Brien, director of retirement plan consulting at Venture Visionary Partners LLC, says he has been having conversations about the elections with plan sponsors and participants since July, targeting September, October and November for on-site and individual meetings with participants.

“It’s a very proactive approach to work with HR teams [and] working with benefits consultants, if they have them internally,” O’Brien says.

O’Brien says just telling people to “stay the course” has become a cliché, and it is important for advisers to acknowledge the emotional impact elections can have on participants and discuss it head-on. He notes that this election was a bit different from many, with the late change at the top of the Democratic ticket, which resulted in the need for a change in discussion of the potential outcomes.

“Participants don’t want to see a bunch of data tables that say, ‘Set and forget it,’” he says. “They want to hear something that makes sense but can generally put them at ease. The way that I do that is: just explain that, anywhere in the marketplace, elections aside, there are pockets that are going to do well, and there are pockets that will not.”

In the context of policy, O’Brien notes that if former president Donald Trump is elected, there will be a focus on tariffs that will likely produce increased costs, but they will also mean a section of the economy will benefit domestically. On the flip side, if Vice President Kamala Harris gets elected, he expects less tariff talk and a friendlier tone with other countries that may mean a bump for international stocks, along with positives for environmental and sustainable industries.

“You don’t try to make market predictions, but you try to give them some perspective that, at the end of the day, markets will continue,” he says. “If you remove the behavior from it, you can see the opportunity. For 401(k) plans, that makes it even easier, because we talk about the benefits of diversification, and we talk about the benefits of dollar-cost-averaging—the fact that you are sticking with your allocation, you have established it, and you’re not making changes unless something has changed for you.”

Long Journey

Gina Buchholz, an investment adviser representative with 401(k) Plan Professionals, says the advisory has received a few requests for education on how to respond to the elections, but most questions and concerns come from plan participants. She says the firm presents on presidential elections and market considerations to plan committees and in one-on-one participant discussions and already has strong sign-up for a post-election webinar on November 21.

Buchholz believes this election will be different from previous ones: She believes it will be “more divisive,” and she anticipates more “tax, fiscal and industry policy changes to come” than following other elections.

Jim Marx, a senior retirement plan services consultant with the Alera Group, says it is important that participants “block out the noise and continue to focus on their goals and their financial plan.” He notes that, going back to 1926, stocks tend to reach new highs, “revert back with a sell-off,” and reach new highs again—with presidential elections coming and going in the meantime.

“Historically, presidential elections have had very little impact on the markets,” Marx says. “If you think about how stocks move up and down, they are typically influenced in the long run by corporate earnings, economic data and monetary policy.” 

Marx compared investing to a road trip: The destination is your goal; one chooses a route as you would diversify your portfolio; credit card points from filling the gas tank could be benefits earned by long-term loyalty; and, finally, when a detour comes, you can change the path to your financial goals.

Realistic Thinking

Alex Assaley, managing director for retirement plans at AFS 401(k) Retirement Services, a Hub International advisory, says his practice has received “ad hoc” questions from plan sponsors about the elections, and it responds with “down-to-earth” guidance for employees focused on end-of-year planning more than the election outcomes.

“The end of the year is a good time to review 401(k) accounts and confirm: 1) how much they are saving and whether it is enough; 2) review their investment allocation; and 3) name and update beneficiaries,” he says. “Even though it is an election year, these are important annual reminders, and we don’t think there should be anything ‘special’ for investors to do, given the election.”

Assaley says his team has been proactively communicating with retirement plan committees and employees about the importance of reviewing accounts and maintaining and aligning investment allocations with long-term goals.

“We have been reminding them that, while the election could make the markets more volatile, it is usually short-lived and not a long-term change to the markets,” he says.

The retirement plan leader notes that this election is different from past cycles, mostly due to the type and flow of information available.

“We continue to live in a heightened environment for information,” he says. “Investors and savers—and all individuals—are consuming more content than ever before, which can shape decisionmaking, both 401(k) and otherwise.”

Turn Emotion Into a Positive

O’Brien, of Venture Visionary Partners, agrees that the information cycle plays a role in shaping participant views—particularly when participants often hear from sources that reinforce one view or another. He notes that this often-emotional election cycle poses a dilemma for advisers.

“It’s really almost a conflict; I want emotion removed in helping people achieve retirement,” he says. “But the only way to moderate their thought and get them to the point where they can see the forest through the trees is to appeal to that emotional aspect.”

In the end, the message he gives is that these types of volatile, short-term periods may be a benefit for long-term retirement savers.

“Don’t tune out the noise; listen to the noise,” O’Brien preaches. “But listen to it from the perspective of: If it introduces volatility and I’ve got a 10- or 20-plus year horizon, that is going to be beneficial to me, even if it’s to the downside in terms of pricing, because I’m going to be buying low, and I’m saving for the long term.”