Retirement Plans Q&A: Best Practices in a Time of Market Stress


Bill Koenig, JD, MBA, Managing Director, Retirement Plan Advisor

Retirement plan sponsors and participants are not exempt from questions about market volatility. We discuss best practices that retirement plans can follow during times of market stress with Bill Koenig.

Q. Bill, what do you tell plan sponsors to focus on during times of market stress?

Ancora serves over 175 retirement plan clients as an investment fiduciary, which requires us to act in the plan sponsor and plan participants’ best interest legally and ethically. During times of heightened volatility and market stress, we remind plan sponsors that we are following an objective, well thought out process to select, monitor, evaluate and replace, when necessary, the investment options chosen for their qualified plan.

We document retirement plan investment line-ups and this rigorous review process in the plan’s Investment Policy Statement (IPS). Whether we meet annually or more frequently with plan sponsors and investment committees, Ancora adheres to this review process on a quarterly basis to ensure that, over the long term, plan sponsors are offering high quality and carefully researched and monitored investment options for plan participants to choose from. This can in turn give our clients peace of mind, even during times of volatility.

Q. How might your message differ when your team meets with plan participants?

Our advice to the 12,000+ plan participants that our team works with is similar. Granted, it’s much more personal for participants because, for most of us, by the time we retire our retirement plan assets will be our largest asset, along with perhaps our primary residence.

It’s cliché, but emphasizing time in the market and not timing the market is tremendously important for plan participants to keep in mind. The power of systematic payroll-deducted contributions, taking full advantage of potential employer matching contributions and the impact of long-term compounding are powerful for participants. When we help create a fund line-up for clients, Ancora includes either (and sometimes both) risk-based asset allocation models and/or target-date funds as investment options. Over time, diversification is important to help smooth out the effects of market volatility and hopefully prevent participants from a reaction like selling low and locking in short-term losses that they might regret later.

Q. What are some of the best practices you remind participants of during times of stress?

Don’t panic and remember that investing in your retirement plan is a marathon, not a sprint. Stocks are long-term assets whose value is derived from their long-term earnings power, not simply what happens in the next few quarters. With that in mind during periods of increased volatility and stress like we are experiencing now, it makes sense for participants to revisit their time horizon and reassess their asset allocation. It is important to re-affirm what roles the various individual investments they hold play within the portfolio. Finally, stay optimistic. Markets ebb and flow, but over time, with proper diversification and high-quality investments, they have proven to be a great way to build long-term wealth.

Q. Any parting words to plan sponsors on the key components of a well-managed retirement plan?

Plan design is important. Plan sponsors should work with their service provider teams to select the plan provisions that can help attract and retain great employees, like a good employer match. Hire an ERISA investment fiduciary like Ancora that has an objective process for fund selection, monitoring and review. Ensure that plan service providers are competent by reviewing the services provided and fees charged by your recordkeeper, third-party administrator and investment advisor every few years. Provide ongoing opportunities throughout the year for plan participants to engage with the plan’s investment advisor via group meetings and one-on-one sessions for more personalization.

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