PANC 2022: Participant Mindsets and Communication Strategies

Market volatility, the rising cost of living, fears of not having saved enough for retirement and concern about Social Security are among the financial topics weighing on the minds of retirement plan participants.

Knowing this can help retirement plan advisers connect with participants and provide valuable insights, according to speakers at the 2022 PLANADVISER National Conference in Scottsdale, Arizona.

Retirement plan advisers may find themselves acting more as financial psychologists than financial advisers, because participants are stressed about the rising cost of living and market volatility, said Sean Kelly, vice president and financial adviser at Heffernan Financial Services, during a panel session titled “Participant Mindsets and Communication Strategies.”

Another panelist, Kelley Palmer, senior director of participant marketing at John Hancock, emphasized that U.S. households are feeling pinched. Even among households earning more than $250,000, 30% are living paycheck to paycheck and “stresses are across the board.”

As a result of growing fiscal stresses, retirement plan participants are looking for help making the most of their retirement savings, and advisers can use that information to increase and improve communications.

Palmer presented data showing that the share of employees seeking help with financial planning has risen consistently since John Hancock started tracking the topic in 2018 and is now at the highest level ever. Within this year alone, the share of employees that would like help with financial planning rose to 75% from 73%. Nearly 80% of people surveyed said they could use help choosing investments in the period between May and August, up from 76% in the first four months of the year, her data showed.

Kelly said when the stock market is volatile, it is important to encourage participants to stay the course with their investments. He recommended communicating with participants about the proximity in time of the worst days in the stock market to the best days. Sharing data from the early part of the COVID-19 pandemic, Kelly showed that some of the worst trading days of 2020 happened in February and March, while some of the best days were in March and April.

He said it is important to show that selling out in reaction to a bad day can cost an investor the opportunity to be in the market when it goes up.

“Time in the market is better than timing the market,” Kelly said, adding that it important to communicate to participants that “with market timing you have to be right twice,” when you sell and when you buy.

In addition to advice about markets, both Kelly and Palmer said that Social Security is an important topic to communicate about with plan participants.

Palmer said it is also important to provide participants help forecasting what their income will look like in retirement. Other topics she suggested for communication with participants included accessing expertise on estate planning, assessing financial wellness and identifying gaps, opening an emergency savings account and understanding educational savings tools.

The panelists also suggested that the topic of investing in a Roth, or after-tax, retirement account is a good one to engage younger participants, because their longer time to retirement means they could benefit from decades of tax-free growth on their investments.