Communicating to Your Investors in a Pandemic: More Guidance and Personalization Needed

As global investors observe the value of their retirement savings plummeting and as tens of millions face sudden unemployment, how should the retirement industry be supporting its customers through communications and other services, especially for investors who lack ongoing access to a financial advisor? For most of the roughly half of U.S. workers who have a retirement account, the primary source of guidance and information will come from retirement plan providers and self-directed investment firms. As these communications start to make their way to investors through emails and online communications, we have a few preliminary observations to share.

Canned, prerecorded presentations about staying the course ring hollow.

So far, most investor communications seem to be out of sync with the times and more of a revival of messaging from the 2008 financial crisis, which was more contained and less concentrated than this one. Rosy messages encouraging investors to “stay the course” and avoid panicking will be glossed over by the many investors who are—or soon will be—facing a personal liquidity crisis.

Communications include technical summaries of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which allows for penalty-free withdrawals from retirement accounts of up to US$100,000. All potentially useful for those who don’t read the news, but one would expect additional guidance about how investors should be thinking about these policy changes—is a withdrawal good for me? The reality is that many Americans are and will be considering withdrawals from their hard-earned retirement savings to meet immediate financial needs. Firms should do more to get ahead of outflows by providing more guidance around alternatives to retirement plan withdrawals. A one-size-fits-all communications approach focused on historical market performance is insufficient. Firms need to tailor their message based on participants’ or investors’ personal financial pictures today.

Get personal and holistic or lose.

For firms without access to participants’ financial information, a few profiling questions could help identify which messages and guidance articles to deliver. Giving one-on-one personalized advice to every retirement investor isn’t feasible, but plan providers and sponsors could make a financial wellness solution available to all employees. These solutions can assess an individual’s financial situation and recommend a course of action. Ideally, these solutions now include specific COVID-19/CARES Act guidance. Financial wellness firms Enrich, FinFit, and LearnLux have recently announced free programs for employers to help address employees’ COVID-19-related financial stress.

Look to digital wealth management firms for inspiration.

Digital investment management firms such as Betterment, Wealthfront, and Stash have been honing their digital communications for many years and have developed a personable approach that places investing in the context of the bigger picture of personal finance. For example, Betterment’s leaders have been delivering a series of short videos and articles to help clients think through all of their liquidity options before tapping their retirement savings. Messaging in this blog post should be part of every plan provider’s communications, as it shares the pecking order of accounts to tap into when faced with cash management challenges.

Plan providers and traditional investment firms have an opportunity to differentiate and build trust in this time of crisis with more personalized communications and assistance. We are only at the beginning of the liquidity crisis and no doubt more communications are planned, but firms need to act fast before their customers make hurried and uninformed decisions with their retirement savings in response to increasing financial pressures and insufficient guidance.

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