401(k) service providers adding call center staff to help ease participant fears
Coronavirus-fueled market panic prompting up to 8 times the usual call volume for some recordkeepers.
The country’s largest service providers to 401(k) plans are increasing call center staff in some cases, and in others directing employees to work remotely in response to unprecedented economic uncertainty amid the coronavirus pandemic, according to recent emails and conversations with industry leaders.
Edelman Financial Engines
“We have increased the number of advisors available through our call center in Phoenix,” said Kelly O’Donnell, executive vice president and head of workplace at Edelman Financial Engines.
“To ensure no disruptions in client servicing, we’ve been preparing advisors and other employees to work remotely and are shifting the majority of our call center advisors working from home with no interruption in client services,” she added.
Call center volume has been as high as eight times the typical day.
“We are seeing a dynamic that is different than other market events given participant concern for their family’s safety and health causing even more stress and the desire to talk with someone,” said O’Donnell in an email.
Empower Retirement
On Thursday, March 12, the Dow Jones Industrial Average dropped 10 percent, and the S&P 500 Index officially entered bear market territory.
Four-digit swings have been the norm for a couple of weeks—days, during the coronavirus pandemic, seem like weeks, or months.
Empower Retirement’s call center saw call volume top nearly 50 percent of a typical day by mid-day Thursday. On-line activity was up 50 percent.
“We know market volatility raises questions and fears, but the retirement investor has been resilient,” said Ed Murphy, president and CEO of Empower Retirement, in an email.
“It can be tempting to exit the market, thinking that one would avoid losses and then could re-enter the market at the right time. But timing the market is rarely successful. Based on our calls, we think the message of holding steady has resonated with investors and there is less of a knee jerk reaction than in years past during market volatility,” added Murphy.
Vanguard
Vanguard has been monitoring trading activity among all its accounts, including 401(k)s, since February 19.
“Defined contribution participants have the lowest incidence of trading—they barely trade at all,” said Jean Young, senior research associate at the Vanguard Center for Investor Research.
“Overall DC household trading has trended down over the past decade as utilization of target-date funds have trended way up,” she added.
Over half of Vanguard’s defined contribution participants are invested in a single target-date fund, meaning their retirement savings is adequately balanced, particularly if they are older. That’s helped assuage some of the overall equity sell off, noted Young.
Nevertheless, the average retirement saver in a 401(k) measures their retirement security by their plan’s account balance.
“These days, when they see their account balance, they’re not feeling as good. The account balance is rose-colored glasses for measuring retirement security. We remind sponsors that you can’t measure retirement readiness from a 401(k) balance. You have to have the long game in mind,” said Young.
And during market panics, “you have to let it ride,” she added.
The average age of a Vanguard participant is 46—old enough to have experienced the financial crisis, and even the technology recession at the turn of the century, and young enough to have time to recover, in spite of the novelty of the coronavirus threat to the economy.
For those much closer to retirement, or in retirement, these are undoubtedly frightening days.
“By and large, when we study those that leave their employer in their 60s, we find they are consolidating their wealth outside of the plan—they are rolling assets into IRAs. We also know people continue to save into their mid 80s, and that people aren’t taking 401(k) distributions until they hit the required age,” said Young.
“How to draw down assets will be unique for each household. This is the time for advice,” she added.
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