Turning market volatility into opportunity: The power of proactive 401(k) management

In today's ever-changing financial landscape, market volatility has become an inevitable reality. These periods of uncertainty present an opportunity for financial advisors to help clients navigate this turbulence by actively managing and providing personalized advice on their workplace retirement plans and investment portfolios. Rather than steering them away from making emotional investment decisions, advisors should focus on instilling confidence and peace of mind through hands-on management. As fluctuations in the market are expected to continue for the next few months until the presidential election this November, ensuring that clients receive proactive management on their retirement plan accounts is more important now than ever.

Election years often bear heightened market volatility, specifically in the three months leading up to voting day. With the VIX substantially down from its peak in early August, where it closed at 38.57, clients will continue to need direction. The sharp downturn of stocks earlier this month prompted retirement savers to scramble, shifting their stocks into safer assets. This resulted in the highest rebalancing of 401(k) accounts since 2020, with trading activity eight times higher than average. With 52% of Americans already feeling overwhelmed with workplace retirement plan information even in stable economic periods, it’s the job of the financial advisor to prevent further rash decisions. Studies show that savers who work with one are 92% more likely to stay the course and keep their assets where they are when the market shifts.

Professional guidance can help alleviate the burden that many savers feel when trying to decipher plan information, while also helping to optimize account growth in both stable and volatile markets. Research shows professionally managed retirement plan accounts can result in up to 3% higher returns per year, net of fees, versus self-directed accounts. By using the technology tools available to them, advisors can minimize panic selling by offering clients reassurance and guidance so they can anticipate a brighter future even during these uncertain times. Pontera makes this easy by providing the capability to comprehensively manage clients’ retirement plan accounts alongside their broader financial portfolio.  

How advisors can help

• Communication is key: Regularly update clients on market conditions. Explain the reasons spurring volatility and the potential impact on their portfolios. Reinforce the importance of their long-term investment strategy.
• Revisit financial goals: Take this opportunity to review clients' financial goals and ensure their portfolios are aligned with their risk tolerance and time horizon. This can help alleviate concerns and reinforce confidence in their investment plan.
• Leverage ground-breaking technology: Utilize available technology to compliantly and securely rebalance clients’ held-away accounts alongside their broader financial portfolio.

Market volatility is an inherent part of investing, but with the right tools and strategies, it doesn’t have to derail clients’ financial goals. As an advisor, expertise and guidance are invaluable in helping clients stay focused on the long term, and offering a guiding hand will strengthen a client’s trust, thus deepening the advisor-client relationship. During these turbulent times, regularly empower clients to embrace the future, remaining secure in the knowledge that their retirement savings are in capable hands.