Playing with Emotions

In the last few weeks since Congress’ debt-ceiling debacle and the S&P downgrade, every morning is a new prediction of how big a market swing we’ll see and whether or not retirement plan participants and/or individual investors will run away from the markets or throw money into them. The old British propaganda slogan “Keep Calm and Carry On” appears to be everywhere and, although many seem to forget its World War I roots, it does seem appropriate for today’s investing climate (in fact, the investment community could rework it for its times of turmoil—Keep Calm and Stay Invested.)

It is indeed an emotional time, and this issue of PLANADVISER deals with multiple emotional issues as they relate to our industry. Target-date funds have been emotional for many, drawing increased scrutiny after the 2008 market drop. Their glide paths, the asset allocation decisions that underpin their movement during the lifetime of the investor, have been questioned across the industry, and by Congress. What has failed to draw the same level of attention are the assumptions embedded in the creation of that glidepath and funds: a host of accumulation and/or participant savings assumptions and rate of return projections. There are more embedded assumptions in target-date designs than most people are aware of—assumptions that greatly affect the funds’ outcome. “Digging Deeper” (page 38) examines these assumptions and clarifies what advisers should know, and what you should be able to share with your clients.

Helping to monitor and select investment options and a recordkeeper for a DC plan could well be the most important plan decision in which a retirement plan adviser plays a dominant role and, although it should be entirely objective, when human beings are involved, emotions and favoritism frequently come into play. In this year’s annual Adviser Experience Survey, we asked advisers about their opinions of investment managers, investment options, and DC vendors. Yes, advisers continue to be tough customers, though some of their opinions have undergone modification over the years. See how adviser evaluations of recordkeepers and investment managers match with your sense of the market in “A Favorite Blend” (page 46).

Few things get Americans more heated than government involvement in the private sector. Perhaps that’s why I find this issue’s feature about Australia’s superannuation system, “Lessons from Down Under” (page 60), so fascinating. Even with significant government mandates, there are emerging concerns that this system—long-vaunted as a model for defined contribution, adviser-led systems—won’t provide enough retirement income for some workers. So, what are the lessons, if any, that we can take from that approach? What does it suggest about the prospects for the American approach?

Do you have an exit strategy for your retirement practice? In the PLANADVISER Adviser Experience Survey, more than half of the advisers surveyed have no exit plan for their business. While having a succession plan for your business might not be easy, it is necessary, say experts. In “The Importance of Succession Planning” (page 84) experts explain why this exercise should be done now, before you’re in an emotional state or tight time frame and might succumb to a fire sale.

By the time you read this, we will have opened nominations for the eighth annual PLANSPONSOR Retirement Plan Adviser of the Year and sixth annual PLANSPONSOR Retirement Plan Adviser Team of the Year awards. As a reminder, nominations are accepted from plan sponsors and other industry professionals during the month of September. However, in order to be considered for the PLANADVISER Top 100 or either of the PLANSPONSOR awards, nominees must complete the online entry form; you can’t win if you don’t play—and I hope many of you will. As I do every year, I look forward to being introduced to this year’s class of superior advisers. In fact, next issue we’ll introduce you to the 2011 PLANADVISER Top 100.

As we head to press, we are making final preparations for the fifth annual PLANADVISER National Conference in Orlando, Florida (in fact, many of you are probably reading this at that conference and I thank you for joining us). If you were not able to attend the conference, I ask why not? It is the premier adviser event for advisers committed to working with retirement plans, and continues to grow in adviser numbers each year—I encourage you to keep it in mind for next year. In any event, whether you are there or not, be sure to stay tuned online to PLANADVISER.com for featured conference recaps. Here’s hoping our fourth quarter is less emotional than our third quarter has been. Keep calm and… —Alison Cooke Mintzer, Executive Editor