Don’t Panic! Bear Market Communication Tips for DC Plan Sponsors
The bear market is challenging defined contribution (DC) plan sponsors to reinforce timeless investing principles while also conveying new rules that bring relief to participants. Good communication practices are a key ingredient to achieving success in both these areas.
1987. 2000. 2008. In hindsight, it’s easy to see that big market sell-offs ultimately lead to recoveries—even if they take time. Each of these chapters brought financial and economic losses, but this year’s bear market brings another burden: worries about the coronavirus (officially, COVID-19) and concerns about protecting and providing for loved ones.
How can DC plan sponsors cut through the anxiety to help participants make informed decisions? Here are ways to communicate with greater impact:
1) Encourage Staying Power—Even When Markets Are Uninviting
Given the steep market decline, some plan participants are likely asking this question: “Why not get out of the market while times are bad?” It seems like a simple question, but predicting sell-offs and recoveries is anything but.
There’s no crystal ball, and no “cliff ahead” or “all clear” signs. Markets often tumble out of nowhere—and they also “climb the wall of worry,” posting gains when news is bad. Investors who sell when markets are down feel the pain of loss twice: when they lock in losses and when they miss out on eventual recoveries.
Fact-based reminders provide reassurance that a knee-jerk reaction isn’t the path to long-term goals. Financial advisors, retirement consultants, investment managers and recordkeepers offer participant materials that make the case for staying invested, including advocating the benefits of dollar-cost averaging. Participants who keep contributing not only invest consistently, but do it at current market lows. If they can afford to continue contributing, they should.
2) Balance the Message: Honest, but Reassuring and Empathetic
Participants want to hear the truth about markets and their investments—even if the news isn’t great. But that news should be joined at the hip with empathy. Make sure to pair negative information with positive reinforcement to keep participants on an even keel.
Financial wellness programs that supplement retirement plan education are a great way to deliver that balance—and now they’re more important than ever before. Plan sponsors cite benefits from these programs, including increased engagement, a better perception of the firm, greater productivity and focus, and lower stress.