Command Performance

Retirement plan advisers are more than bit players in the never-ending drama of how to manage plan participants’ expectations. We are center stage, incessantly judged under a harsh spotlight of “What have you done for me lately?” as we scramble to keep the story moving to everyone’s satisfaction.

The adviser today must contemplate each participant’s time horizon through the prism of retirement readiness. And he must now also factor into his model a fast-approaching fiscal “cliff-hanger,” with all the uncertainty and implications of the Mayan calendar.  

Decisionmaking Theory 

There are decisions to be made. Some are macro-oriented; some are micro-level, yet they need to be made by a retirement plan adviser. Some of these investment decisions are to be made in the face of relative certainty, yet the majority are to be made under the cloak of uncertainty. In a time such as this, does the adviser rely upon the Book of Normal Return Distributions or the School of Hard Knocks, where “participation certificates” were earned by anyone who serviced clients through either the last quarter of 1987 or the fall of 2008? (For those who can recall the oil embargo of 1973, that event also qualifies one for a participation certificate. Although much was taught, very few lessons were actually learned, as evidenced by today’s lack of any real energy policy.)

Participation Certificate Lessons

As an industry, what should advisers have learned from these experiences? To borrow from the lexicon of past investment gurus, “What is the underlying theme?” When the reference point is plan participant attitudes and reactions, the theme is a simple one:

I hired you to get me out of the market when it is going to go down. 

I can lose money on my own without paying you a fee to do it for me! 

You knew it was going down. Why didn’t you sell? 

If you are the holder of a participation certificate, you have heard these words. Having the benefit of 20/20 hindsight, what could have made a difference to you or your clients?

Asset allocation is one area that many advisers can influence, either by advising, directing or educating. Different business models will require advisers to help clients in different ways, but at the end of the day advisers can, do and should have an impact on a client’s asset allocation. Asset allocation is one area where an adviser can impact alpha! 

At this point in your career, are you comfortable sitting back—assuming the position of casual observer and doing nothing? During these times of uncertainty, is doing nothing a viable option?

Lessons Learned

From a client-servicing perspective, doing nothing is a reliable and expedient strategy for winnowing a client list.

Clients deserve to hear from you during uncertain and stressful times. We are currently in uncertain and stressful times. Communication is a critical skill set for advisers. Communicating is part of what you are expected to do.

Retirement plan advisers intending to remain in this business for the long term will undoubtedly have the opportunity to field the tough asset allocation and stock-drop questions from plan participants for years to come. The point here is that advisers must:

• Know their strategy;

• Communicate that strategy to clients; and

• Adjust to client needs.

That is, unless the maniacal doomsday interpretations of the Mayan calendar were correct, in which case this article will never be read.