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Participant Reactions to COVID-19 Volatility

Sharing observations amid coronavirus-fueled market volatility.

Participants Are Calling, But Few Are Transacting

Recordkeepers have reported that service center call volumes have increased by up to 30% and that the average call length is up significantly, increasing more so based on the volatility of the day. Recordkeepers are managing the longer call wait times by implementing recorded messages to direct participants to alternative sources of information as well as implementing virtual queue with callback so that participants do not have to remain on hold.

Most participants have been staying the course and maintaining a long-term perspective. While call volumes are up, few participants are making changes. Recordkeepers have reported that between 1% to 3% of participants are making changes to their portfolios.

Interestingly, of those transacting, no clear trends can be identified. We have anecdotally heard that some participants that are closer in age to retirement have moved their money out of equities to bonds and cash options. While conversely, we have also heard that some participants are moving into equities. Coincidently, Vanguard recently released an article on their observations of the trade activity among their U.S. self-directed individual investors from the market peak on February 19, 2020 to March 20, 2020. In this article, Vanguard noted that of those individuals making trades, 7 out of 10 individuals moved into equities.

On a closing note, more participants have inquired about loans and distribution options, but recordkeepers have not seen a spike in activity yet. All the recordkeepers have been preparing for the CARES Act since early last week and many expect that this activity will likely pick up in the weeks that ensue.

Recordkeepers Stepping Up

Recordkeepers have made adjustments to their normal operations to account for COVID-19. To manage the increased call volumes employees throughout their organizations have been redeployed to the phones, overtime is mandatory for all staff and the hours of operation for the call centers have been temporarily extended, in some cases Saturday hours are available as well.

With in-person meetings out of the question, WebEx meetings have now replaced onsite education meetings and one-on-one meetings with participants. Additionally, some recordkeepers have created market volatility websites to offer participants more education on the current environment. Others have been providing public online content containing educational tools and calculators that are easily accessible without the participant having to log into their account.

Employers Cutting Match

Companies are starting to suspend, defer or decrease the amount of money they match in workers’ retirement accounts. If the 2008 financial crisis is any guide, more will likely follow due to the coronavirus-fueled economic downturn, but in most cases the cuts were only temporary.

PEI Amped Up Investment Oversight

Our research team has increased their touch points with managers during these volatile times. Please read more about the insights we have gathered here. Furthermore, we have confirmed each of our client’s defined contribution investment menus are adequately diversified and have been designed to enable participants to have access to different types of investments, including those with less volatility.