Plan sponsors and money managers fielding panicked calls by plan members should be investing in continuous education efforts to keep their clients focused on long-term goals, according to experts.
“It’s too late to say anything now,” says Zainul Ali, a senior asset consultant with Towers Perrin. “Plan sponsors should have been talking to their members all along, instead of closing the barn door after the horses have run away.”
He explains that the best way to mitigate plan member fear is through constant education, adding that it’s up to plan sponsors to try and get through to plan members towards investing, especially when times are good. “Investors can be apathetic, but it’s the responsibility of the plan sponsor to ensure that plan members do pay attention to it.”
Plan sponsors seem to have heeded the call. Duane Green, vice-president of strategic alliances at Franklin Templeton Investments, says his plan members are living proof of the benefits of employee education. “We may have an advantage over other plan members due to our firm’s constant messages about long-term investing and diversification,” he explains.
Green says that most of Franklin Templeton’s employees are invested in a target-date fund which gives them comfort during times of volatility. “I think they have that comfort in knowing they are well diversified in a long-term solution, versus something that might be more affected by short-term fluctuations in the markets.”
Tom Nunn, assistant vice-president of HR and communications at Manulife Financial in Waterloo, says that while his company is seeing an increase in calls concerning the firm’s defined contribution plan, it’s nothing out of the ordinary.
“We regularly address the issue of taking a long-term view of retirement and making regular contributions through all cycles of the market,” he explains. “That allows members to take advantage of dollar-cost averaging to buffer the impact of both extremes of the market.”
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Kim Duxbury, assistant vice-president, marketing and communications, group retirement services at Sun Life Financial, says that in times like these, plan sponsors are better off handing panicked calls from plan members to their service providers.
“Our message has been consistent over the years: stay the course,” she explains. “We encourage them to think about diversification and to avoid making emotional decisions based on what they’re hearing on the radio when they’re driving home.”
Like Franklin Templeton, Sun Life has numerous articles for plan members regarding market volatility and the importance of diversification, according to Duxbury.
“Education is critical,” she says. “One of the challenges we face is that plan members sometimes think it’s Sun Life funds, or the employer’s funds, that is at fault for poor performance, when in reality it’s not, it’s the market. So we need to hammer that message home that it’s not just money at Sun Life, its money anywhere.”
Ali says that the long view needs to be impressed upon plan members continuously in order for people to appreciate that any downturn in the market is really just a slight drop as opposed to a precipitous fall.
“Volatility happens,” he explains. “It’s something you have to live with when you invest in financial markets.”
To comment on this story, email jody.white@rci.rogers.com.