Don’t Panic! Bear Market Communication Tips for DC Plan Sponsors

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.

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.

Keep Messages Simple, Visual and Action Oriented

In turbulent times, the pace of communication increases—and so do the stakes. Participants are bombarded 24/7 by doom-and-gloom news on television and in their news feeds. Plan communication should be a guidepost, designed to catch and hold readers’ attention—and keep them centered.

Use Simple Language: Build the message around positive, pragmatic messages, and leave jargon on the cutting room floor (define it if you can’t leave it out). Don’t assume anything is obvious.

Don’t Spare the Displays: If a picture is worth a thousand words, it’s worth many times that number in the sophisticated world of retirement planning. A strong chart can make data come alive and reinforce key points.

Highlight Key Information: Feature the most important information first, in the most prominent real estate with the boldest treatment. From there, you can offer more detailed information as needed. Sidebars are good ways to move detail out of the main story.

Provide a Call to Action or Key Takeaways: Close every piece with clear next steps, whether it’s making an election or using a finance tool. If there’s no call to action, summarize the key takeaways.

Make a Good Default Option the Foundation

It helps to have a strong focal point that embodies investing best practices. Retirement plans are increasingly turning to target-date strategies as their qualified default investment alternative. These solutions have evolved beyond first-generation prepackaged, proprietary mutual fund vehicles.

Today, target-date strategies offer open architecture, cost-saving collective investment trusts, custom glide paths with diversifying asset classes, and in-plan guaranteed-lifetime income solutions. No investment is immune to market turmoil, but target-date solutions offer professionally managed portfolios that embody comprehensive investment design.