00:00:05 – TAYLOR:
Hi, I'm Taylor Garlesky of Schwab Retirement Plan Services, and this is Schwab @Home. I know I'm stating the obvious, but 2020 was a rollercoaster of a year, with COVID-19 changing the way we work and the way we live. An election, civil unrest and market volatility, all impacted employers and their employees. Not to mention it was one of the most active years in recent memory when it comes to retirement plans. Between the SECURE Act, then the CARES Act, and now Secure Act 2.0 proposed legislation, it's really a lot. I've invited Phyllis Klein, Senior Director of Retirement Services from CAPTRUST Financial Advisors to join me to talk more about the trends she's seeing in retirement space right now. Hi, Phyllis. Thanks for joining us.
00:49 – PHYLLIS:
Hi ,Taylor. I am very excited to be here, thanks.
00:00:54 – TAYLOR:
We're going to try to cut through the noise, share some insights, trends, and supporting data that demonstrate what the impact to American workers was, all with the underlying focus on how people can continue to save for retirement during this uncertain time. We conducted our 2020 annual 401(k) Participant Survey to understand how employees are thinking about their 401(k) savings, both now and over the long-term. I will note, the results are from a national survey of 401(k) participants, so not specific to Schwab Retirement Plan Services.
00:01:28
To no surprise participants have definitely felt the impact of COVID-19 on their 401(k). Our 401(k) Participant Survey found that over 40% of participants made changes to their 401(k) due to COVID-19. The most common changes were rebalancing their accounts and were increasing their contribution rate. Participants who made changes also had an equal mix of increasing or decreasing their exposure to equities, with only 5% stopping contributions altogether. In your world and in your work with 401(k) participants, have you seen similar activity?
00:02:0-3 – PHYLLIS:
I would agree with most of the observations. Since everything kind of went into a spin last March, it was interesting for us to see how participants were reacting. And I know for us, our advice desk, the calls went up about 20%, and I would guarantee you that was all in the last two weeks of March last year. So as COVID hit and we all were making changes and the market was having really, really heavy volatility, we definitely saw engagement go up very quickly.
00:02:39
As far as the changes that were being made, I would say for us, a lot of our message to employees were just stay the course. And I think that we have seen through the results of COVID throughout the year and through the survey that Schwab did, just the idea that people, we've gone from this enrollment, to education, to guidance, now to advice, and people really are starting to anchor on advice. And I think that, for us, as we've seen the anxiety grow, that's where we are really focusing with participants.
00:03:19 – TAYLOR:
The study, itself, found that participants making investment decisions in their 401(k) increases significantly with the help of financial professional to talk with, right? So almost half of them reported that they would be very confident in their decisions when they get help versus 32% not so much, right, when they're doing it on their own. To your point, and it sounds similar, you know, engagement is up, people are calling and when they have the opportunity to receive financial counseling and coaching, they end up making positive action or taking positive action. Clearly, I would say access to professional guidance was a catalyst for action. Would you agree?
00:04:00 – PHYLLIS:
I would totally agree, and I would tell you that whether that professional guidance is coming in the form of direct advice that they can get by talking to a person, whether it's a call desk, whether it's in-person… well, we're not doing an in-person right now, I guess, with COVID at the moment. And even the… I'd say, even what we'll see is growth in the managed account space, I think these are all really going to play into that idea that whether people make changes because they particularly have to, or whether they make changes because changes are being made for them, right?
00;04:34
And so I would tell you that we see the same thing from the standpoint of percentages, although I would tell you that a little bit down in 2020. So, typically, when we engage with somebody who needs to make some kind of change, we're seeing them make those changes upwards almost 70% of the times. Those numbers definitely dropped in 2020, but not horrifically, they dropped to about 60%. And I think it's because people weren't calling, necessarily, with questions about making changes, they were calling for reassurance being a big one, really, and just, 'Where am I at?' and, 'What is the outlook?' 'What is…' you know, at least for CAPTRUST site, 'What is… what's the outlook look like?' So I think that as we think about this being such a big asset for people that your survey, surveys within the marketplace, I think you're just going to continue to see that they want help, they need help, and sometimes, you know, these services are the only place they can get help.
00:05:39 – TAYLOR:
So whether they're interacting with a provider like Schwab or CAPTRUST, a consultant, I think the good news is we're there to help. And then to your point, you mentioned managed accounts. You know, continuing to select managed account solutions for ongoing management, not only for peace of mind that their assets are being managed professionally, but, also, it's, you know, keeping them comfortable, right, and staying the course during market… market volatility. What advice would you have for plan sponsors, employers, when it comes to closing that confidence gap and… and really helping participants be on track for their retirement goals?
00:06:16 – PHYLLIS:
I think there's a variety of things that we talk to sponsors about. I think anytime you can automate something we've seen that we have... if you've been in this industry as long as I have, we've learned that really trying to take employees and make them into investors is a difficult, difficult undertaking, right? So anything that can automate processes, whether that automation is enrollment, if it's increase in savings amount, if it's a target date, if it's what's now going to be dynamic QDIA, a target date to a managed account, all of those things to me are automated. And all of those things tend to be pretty well embraced, at least by our participants that we talk to. So I think that is probably a big thing.
00:07:04
I think coming out of COVID, the economics are going to come into play with some of those things. So we have a… you know, I'm sure you guys see it, too, clients that have suffered economically with shutdowns, layoff, furloughs, all of those types of things. So are they really in a position to automate everything that maybe, you know, ideally we would say is the best thing to do from an industry standpoint.
00:07:30
The other thing I think is that we know that when people engage, that they feel much more confident. We survey all of the people that we talk to, and the numbers are always high. They're… 96% of them feel more confident after they talked to somebody. 98% of them think it's useful to have benefits or access to either professional help, whether it’s managed accounts, whether it's individual help. And so I do think that we should be listening, employers should be listening to those employees as they ask for things, or they simply are able to confirm the value of something.
00:08:11 – TAYLOR:
Thank you, Phyllis, for your thoughts and your perspective. It's really been a pleasure to speak with you today.
00:08:16 – PHYLLIS:
Thanks for having me and thanks for the invitation.
00:08:20 – TAYLOR:
And I thank everyone for joining us. This has been another edition of Schwab @Home.