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The End of the World as We Knew it?

Practice Management

I have long been enamored of so-called “end of the world” fiction—the kind where society as we know it is confronted by the aftermath of some cataclysmic event. And while “this” doesn’t seem to be that—there’s likely to be some significant changes ahead.

Here’s a half dozen to consider…

More Teleworking—and Tele-Advising

This is so obvious it (almost) doesn’t merit mention. Most of us are out of the office so much for one thing or another that many don’t even bother putting up an “out of office” message on their email.[i] Similarly, many are already dealing with participant populations remotely—and dealing with remote participant populations—but weeks of (them) operating from home will surely expand that universe.

Virtual Realities—More Virtual Meetings

Not quite a year ago, we asked NAPA-Net readers about what then seemed to be an emerging trend: the use of some kind of webcast platform to conduct plan committee meetings. At that time a plurality (41%) of respondents had, while 26% had done so for some clients, but not all. Roughly a quarter (24%) hadn’t done anything. Stay at home restrictions and visitor bans at workplaces will surely expand those numbers—and with market volatility at historic levels, it’s not as though those reviews can (or should) be postponed. 

Tours of ‘Duty’

If you’ve sold—or bought—a house in the past couple of years—particularly one that might be hundreds of miles away, you will be familiar with the increasingly popular 360-degree tour options. Now, think for a minute about those due diligence reviews you do—the time out of the office, the increasingly disparate locations that comprise the infrastructure of the firms you—and your team—visit as part of that process. Sure, there’s nothing like being there in person—but what if some, or all, of that could be done virtually, perhaps assisted by VR technology?   

Active Gets More Attention

In recent months it’s become quite trendy to push passive approaches—and surely when the markets are as strong and resurgent as they have been, passive/indexing’s “follow the leader” approach has proven to be a viable, winning approach—certainly for those looking to stay ahead of litigation challenging the choice of active management when passive alternatives existed (though the courts, writ large, don’t yet seem to have been persuaded). It’s too early to see how active management will fare in the uncharted waters we find ourselves—but if there was ever an opportunity to make that case, this would seem to be one.

Getting a (Better) Fix on Fixed Income

While most participants (and plan sponsors) likely chose to ride out the (not yet behind us) storm, those who did move seemed (at least based on dollar volumes) to move from equities to fixed income. Of course, fixed income as a category covers a broad swathe of options, and doubtless most of the participants moving in that direction were focused more on (relative) safety than diversification. Regardless, plan fiduciaries are surely going to get—and ask—more questions about those choices in the future.

Flat Fees—Your ‘Level’ (Is) Best 

While the expanding fiduciary focus has already served to move many, if not most, retirement plan advisors to a flat fee structure, rather than one that is asset-based. There’s something to be said, of course, for the notion that when markets decline, you’re also taking a pay “cut”—but arguably when the markets decline you’re likely working harder, and with more risk.

Those who haven’t already moved on from a reliance on asset-based revenues will surely—once the dust has settled—be inclined to do so. But they’ll be playing catch-up with those who have already embraced a level fee approach.

What’s Next?

In all likelihood the current turmoil will draw attention to other current issues—consolidation (though that seems a constant), a larger emphasis on the need for emergency savings, an increased focus on financial wellness, more scrutiny on the composition of managed accounts, and of the glidepath(s) of target-date funds… the cost—and value—of advice.
It may well be the “end of the world” as we know it—but those who make preparations for that future—like the lyrics in that classic REM song—can feel fine.

Footnote

[i] It may well turn out that an awful lot of those meetings that you thought should have been an email really could have been—and now they will be.