How Has 401(k) Participant Behavior Been During The COVID-19 Crisis?

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Joshua Dietch is a vice president of T. Rowe Price Associates, Inc., and the group manager of Retirement Thought Leadership. Joshua joined T. Rowe Price in 2017 and is responsible for leading a team of researchers and writers who create retirement thought leadership in support of the firm's workplace retirement, intermediary, and institutional businesses. Prior to joining the firm, he held a number of senior industry roles, including head of Retirement and Institutional with Strategic Insight, managing director with Chatham Partners, director of Product Marketing and Management with ADP Retirement Services, and associate director of Institutional Markets with Cerulli Associates. In addition to his current role at T. Rowe Price, Joshua is an Executive Committee member of the Defined Contribution Institutional Investment Association and is chair of its Retirement Research Board. He earned a B.A. in history from Bates College and is a Series 7 and 66 registered representative.

With Guest:

Josh Dietch

Vice President, Retirement Thought Leadership

T. Rowe Price

Recap, Highlights, and Thoughts

One common question amongst employers during the COVID-19 pandemic has been how their employees have been reacting in their 401(k) plans. To delve through this, I am excited to welcome back Josh Dietch, VP of Retirement Thought Leadership at T. Rowe Price. During our conversation, we hit on a few of the obvious thinks like stats around investment and contribution changes, but quickly delve into some of the bigger challenges retirement savers face as a result of recent events. Josh also shares some eye popping numbers on the new CARES act provisions and how their clients are approaching them. Since we missed this point in our conversation, Josh is pulling his data and observations from the over 5,700 retirement plans and 2 million participants that T. Rowe Price works with. 

Before we get started, if you have been enjoying the podcast please mention it to anyone you think would benefit from listening. If they already like podcasts, suggest they search 401(k) Fridays on their favorite podcast app, if they are new to podcasts, you might have to explain a few things to them. 

Thats it, I know you will enjoy my conversation with Josh. 

​Sincerely Your Host, 

Rick Unser

NEW: Episode Transcript

Rick Unser (00:00):

Well, Josh, welcome back to the podcast. I'm looking forward to chatting with you yet again, which means you must've done some good stuff in the past and today I'm looking forward to hear what you and T Rowe price have on some bigger kind of participant data. Participant behavior issues. Well, issues isn't necessarily the right word, but statistics during this [inaudible] bear market, et cetera.


Josh Dietch (00:24):

Happy to be here Rick, and thanks for inviting me back. Glad of earned it.


Rick Unser (00:29):

Well, Hey, what have you done for me lately? So you better be good today. Right? I remember way back when prior to Covin prior to the bear market, prior to just a lot of the events that we've seen unfold over the last several months, I've, we've talked to several target date managers including some from T Rowe price. And one of the big questions I think that was kind of unanswered or unknown at that point in time is, you know, we got a lot of money moving into these things. We got a lot of people that are using them as their plan default and we haven't really seen a downturn in the market since targeted funds have taken over the assets in retirement plans. So how are people going to react when the market does have a downturn? Well, here we are. I think the market's had a downturn and I beat just curious what your data at Tiro suggests about how people in target date funds in workplace retirement plans have been reacting.

Josh Dietch (01:33):

Thanks for you know, it's interesting. I actually do see some parallels to the global financial crisis because we're now roughly a week since into this thing and what we see is that overall three and a half percent have actually changed their investments. And if we look more closely at target date investors, it's 1%. So for the most part, people are staying the course. That doesn't mean there's not activity though. It's just isolated. And actually what we're seeing is that you can kind of break it into chapters. We saw a lot more volatility in terms of exchange activity, let's say late February through the end of March compared to the recovery in April. And actually maybe I, I've sort of a very delete here. What we saw was for those that were invested in equities, they're moving out of equities in February into March, but you actually saw more movement into equities as you know the market recovered. So in some ways you know, you see a little bit of bad behavior, if you will, because theory you could have people that are selling low and then you know, buying into a recovery, which is not exactly what you want them to do. Now if you look exclusively at targeted investors, you see more consistency in the behavior. So it's, it is, it is kind of interesting. But I also think, going back to what I said or you mentioned earlier, it's consistent with what we saw in the global financial crisis.


Rick Unser (03:27):

Yeah. And I guess in my mind, thinking back to the timing around the global financial crisis that was 2008 into early 2009 and just thinking about target date funds and looking back in history to the pension protection act of 2006 and the broader adoption of the qualified default investment alternative provisions and such that really gave rise or kind of gave the rocket fuel to target date fund adoption and retirement plans. That was early. I mean I'm thinking back to some of my clients and some of the decisions that were being made, people were really at that point in time just kind of making that switch. I mean I remember anecdotally some people that the timing couldn't have been worse in that they were making changes, they were merging plans, they were doing record-keeper changes, whatever in that process. And one of the big concerns about what was going on at that point in time is boom, you know, we're, we're taking advantage of these fiduciary rules that three months ago, six months ago, and when we made all these decisions seemed really smart and really to make a lot of sense and now the market has fallen apart and do we still move forward with these?


Rick Unser (04:40):

And you know, yes. Long story short, people did and, and I think over the prevailing 10 or so years, that decision looked really good, but I don't know, my perception was because of how early that was. Yes. That there was a lot of parallels in the market, but we did, we couldn't really look at that and say, all right, we've got a great sample set for people and their behaviors are the decisions that are going to make with regards to targeting funds. If the market ever falls apart again like it did in the global financial crisis,


Josh Dietch (05:09):

I feel like you're throwing me a ball right down the middle of,


Rick Unser (05:13):

It's good to do that sometimes. You know,


Josh Dietch (05:16):

One of the things you sort of have to remember about our business is that we were very early in developing our target date suite. So it's always been a core component of our business. And even in as you put it, you know, kind of the early days we still had scale so we could observe the behavior. But you raised something that I think is, is actually quite interesting because I guess one way to put it is like not all target date investors are created equal. So you can look at it, you know, a few different ways. You can say, well do they, you know, solely invest in target date funds or are they investing in target date funds in addition to other investments they might may hold in their account. And you do see different behaviors. Those that are, that are not a hundred percent invested in target date funds.


Josh Dietch (06:08):

I would agree with you. You probably didn't see the same behavior because it wasn't solely just the availability of a target date fund, but it was combined with the adoption of ACU, DIA and auto enrollment. So suddenly you had participants in plans that, you know, five years ago would, it probably wouldn't have been participating. The other thing that we see in the behavior and we saw this going back, you know, even even back then is those in the sort of more you know, I guess the coming soon vintages are more likely to transact. So those are the people on the cusp of retirement, the very people that you don't want to react because quite frankly, the implication of missing a recovery is greatest to them because time isn't on their side. And so, you know, staying the course and taking advantage of the recovery that we know will happen, we just don't know when and we don't know the pattern.


Josh Dietch (07:19):

So, you know, sort of panicking at the last moment is arguably the worst thing you can do. And we do see some of that in this and I think that's what we saw in [inaudible] as well. So it sort of tells me that, you know, yes, there's, there's still is a little bit of history repeating itself. To your point, there's simply more of it because auto enrollment at least among large plans is largely ubiquitous. You know, 75% of plans are doing it and the use of ACU, DIA mostly target date funds is similarly ubiquitous. So you don't want to see people transacting at exactly the wrong times.


Rick Unser (08:08):

Yeah. And I had a few conversations with people quite frankly, that represent, I think what you're describing, which is, Hey, I am 62, 64, I don't know, thrown an odd number there. 61, I'm within a couple of years of retirement. I'm in this target date fund. What's going on? What do I do? And I think that I'm with you, I think that a lot of people in that range to the extent that they were looking at statements or logging on or checking their balances, I think we're a little bit nervous. I think some of the lack of understanding of being automatically enrolled, being placed into something like this without a lot of, let's call it self-selection I think can bring up some natural questions obviously, which is, okay, this thing was doing great for a while. Now it's broken. What's going on? What do I need to do? What do I need to be thinking about? Do I need to do something different? I, especially for people that are closer to retirement that are thinking about lifestyle, income replacement, et cetera, that logically should be a little more top of mind as someone is within that window of a couple of years in term. In terms of making that transition into or out of, I guess the workforce.


Josh Dietch (09:24):

I think there's also like a behavioral aspect to it. What the paradox is is that if you're 60 years old, 55 years old, 65 years old, you're probably not a hundred percent invested in equities. But what we hear on the news every day is the Dow, this, the S and P VAT.


Rick Unser (09:49):

Yeah, great point.


Josh Dietch (09:50):

And that truly isn't reflective of your portfolio. And I'll just give you a personal anecdote. You know, I, I hopefully am, I'm a few years away from retirement, but you know, I've got kids that will go to college someday and you know, one one is, you know, within a couple years and while five 29 plans are not target date funds. Exactly. They are similar. And so, you know, I was no, cause it was that time of the year I was doing my taxes and I needed to find out, you know, how much I had contributed to my son's five 29 accounts. So I, I had to look at the portfolio, the absolute depth of the market crash. And it dawned on me, it's like, well this isn't a hundred percent equities these two years from college, half of it's in fixed income. And so yes, the account was down, but it wasn't reflective of the headlines that I was seeing on TV or reading online every single day. And that just gave me a different perspective. And it also gave me the perspective of just thinking about my day job and trying to, how do we communicate with investors to give them that perspective to a, you know, empathize with their, with their, with their concerns, but then help them understand and put it into context the way that they should be thinking about it. Because to simply allow people's fears to run a muck, you know, you just don't want to see them do things that ultimately aren't in their best longterm interests.


Rick Unser (11:38):

And I would make that parallel to what I see on the news. For example, this morning the big headline is my wife was watching the today show and I was kind of darting in and out of the room was there is no meat in the grocery market on the shelves. Everything's barren. We're getting to have this big meat shortage. And I don't know, I went to the grocery store the other day seem pretty good to me, but that is what's driving people's attention. That's what's capturing eyeballs right now. And I think that's kind of maybe somewhat similar to what you're talking about. Whereas, Hey, you know, if you have people that are close to retirement in a well diversified portfolio, yeah. That the shock is, Hey, the, the, the meat market portion of the grocery store is empty your or is close to empty. That parallels the dowel or that parallels the broader stock market. But you know, in the grand scheme of things, that doesn't necessarily mean a, that's what's happening in reality because of these other factors. These other investments is other diversification that might be present within your portfolio.


Josh Dietch (12:40):

Yeah, and it's, it's, so, you know, we come in from different sides of, of, of the coin, but it's sort of incumbent upon us to give people that perspective and remind them that, you know, Hey, maybe they have been doing things the right way. Hey, you remember the last time there was a market downturn? Maybe not similar, but we could draw lessons from it. Here's how long it took for a portfolio that was a hundred percent equities versus a, say a 60, 40 portfolio to actually recover. And suddenly the problem doesn't. Well, it's still a problem. It doesn't meet the urgency or or, or the volume of the headline.


Rick Unser (13:24):

Well, and let me come back to where we started and I think you gave us a really good statistic there, which is that from two rows perspective, 1% of people in target date funds have made a change. I mean that sounds pretty good. I mean that sounds to me as if people are doing what logically they should be doing, which is using these as a longterm investment vehicle, not necessarily panicking or making decisions at inopportune times in the market cycle. I got to imagine you guys had some conversations behind the scenes about okay, in a market downturn or in a, in a draw down, what do we think will happen? What do we think is going to be a participant behavior or some things that we see or want to be looking out for? I mean, what we've seen so far with 1% coming out of target date funds are people that are moving money out of target date funds and workplace retirement plans. Is that within some of the realms of the conversations you were having internally? Either informally or formally.


Josh Dietch (14:34):

I think every firm has contingency planning based on market events. You know, for, for product managers you sort of have to manage to cashflow and you know, you have to manage capacity. So I, I think they're, those conversations, they don't just start when you see volatility, they're ongoing and there's always contingency planning. I think what's a little different this time, and I'm not really in a position to comment nor frankly do I know is did anyone envision what happens if there's a public health crisis? Yeah, because that's the, that's the dimension here that is just fundamentally different than any of us have dealt with in our working lifetimes. And you know, in Oh eight Oh nine, it was a crisis that started in the financial markets and progressed into everyone's day to day life. This started as a health crisis and in order to deal with that health crisis, it has impacted the financial markets because it required the, basically the shuttering of a good portion of the economy and that that's just fundamentally different.


Josh Dietch (16:03):

But what we're seeing in the behavior as a, as I mentioned, is, is largely consistent just to draw like a starker contrast. So if we want to use that 1% traded, if you will, that we're invested a hundred percent in target date funds. So at 1.1% pulled the rip cord in some manner compared that to people that had nothing invested in target date funds, it was 5% of the population over a 12 month period. So again, that's not a large percentage. The thing you sort of ask yourself, okay, so what types of things are they doing? So what you see is they're going from equities into fixed income or stable value. So it's that treadmill from fear to greed and greed to fear.


Rick Unser (17:00):



Josh Dietch (17:01):

And that's the race or I should say rat race for the target date fund gets you out of. And we're seeing that it's largely successful at doing that.


Rick Unser (17:12):

So let me come back to that stat for a second. So the 1% that made sense got that one. But so a second ago you mentioned that 5% that are not invested in target date funds made changes. Did I, did I track that correctly or, or was there a better way to say that


Josh Dietch (17:29):

You did it? But what I would say is 5% over a 12 month period. So they didn't necessarily, it wasn't 5% in the last month. It was 5% over the last 12 months.


Rick Unser (17:44):

Got it. So I'm, I've chosen my own destiny. I've picked through design a handful of investments in my workplace retirement plan that is not a target date fund. So some of the other individual options that are offered on the menu. And if I was one of those people or you know, there's a big number that that adds up to. And basically what you're saying is that over the last 12 months, only 5% of those people made any changes or made changes or made significant changes. What's, what does that mean?


Josh Dietch (18:20):

Any change? Got it. So we'll just define it and it's in the process of context. And it's interesting. So, I don't know if you saw this recently, but David Blanchett came out with a piece, I think it was actually in the fourth quarter of last year that showed that people like basically, you know, as a trend, we've been going with smaller venues equals smarter menus, you know, sort of limit the amount of harm that people can do themselves with self-styled asset allocations. And he came out with a paper basically saying, Hey, look, no, you're not giving people the right tools. And it's sort of like the better ingredients, better pizza argument, you know, you need, you need more, more ingredients to make a taste of your pie. And I think some of our day this year, well, it's a period in time and I, you know, it just, it provides an interesting counterbalance. I mean, generally when I see David Blanchett come out with something, he's a rock star, I just immediately say, wow, it must, must be true. But I think here it shows, you know, potentially what the danger of that can be. Because if you look over a 10 year period, you know trees, we're going to grow into the sky and then in the space of a month you just wiped out those 10 years. Or maybe not those 10 years, but certainly the last three. Yeah, and you know, it's just, it's, it's, it's back to reality.


Rick Unser (19:51):

Yeah, and I, I liked David Blanchett. He was just on the podcast here recently. We talked a lot about managed accounts and it was a little before the [inaudible] market reaction kicked in, but nonetheless still some good perspective on, you know, his thoughts on a lot of, a lot of what you just talked about, but also on people and their behaviors and managed accounts. There's a lot of parallels there obviously between target date funds and managed accounts. I guess one of the other things that has come of this crisis has been some relief, some stimulus by the government. One of those was the cares act. I'm sure we're going to see more, but that obviously had a pretty big impact on what people can now do with their retirement balances through the carers related distributions or loan provisions. I know those have only been around for a month or so, but what are you seeing in terms of data or other statistics that might be interesting or relevant to what people are or aren't doing as it relates to requesting some of those new distribution or loan provisions?


Josh Dietch (21:05):

Yeah, it's interesting. So if you sort of think about it this way, there's a two step process to all of this. First, the employer has to decide that they're going to offer it to, they've got to have a record keeper that is operationally ready to administer those provisions and then you know, way down the line you can amend your plan to reflect that. So what I would say is that among, you know, sort of smaller plans, we don't see a ton of adoption. Roughly 12% of our plans with less than $25 million have adopted any of the provisions. Whereas for larger plans, TAF of them, that's of a couple of weeks ago. So obviously those numbers have moved up and we anticipate that, that, that is going to continue to arise. So then you sort of have to say, okay great, we know that, you know, in our book if we've got a couple million participants and, and, and, and, and, and roughly, you know, 5,700 plans, you know, so we have a universe of plans that, that conceivably could do this.


Josh Dietch (22:20):

So then you sort of say, okay, what are they adopting? I think the, the most, the most prevalent is what we're seeing is the adoption of the Corona virus related distributions more so than the loans. Cause cause you sorta think about it, it's easier to administer their self certification and there's not this sort of funky amortization. You gotta take a loan today and then you may not make a payment for, was it the end of the year, so into next, next year. So operationally, a lot of things sort of have to happen. So we're, we're sort of, my personal opinion is, I think you'll, you'll see that come, but I also think that from a participant standpoint, the loan is riskier than the coronavirus related distribution. Because what happens if you ultimately default on the loan, it gets deemed you pay the excise.


Josh Dietch (23:29):

Whereas with the distribution, you still have three years to figure it out whether or not you want to pay it back. And that seems to be a much easier take. And you know, we, we see, you know, adoption by plan sponsors and it varies industry to industry. You know, some industries it's more more popular than that than others. But what we're seeing is that the total percentage of the population that is using the Corona virus distribution, still very small. It's less than a half percent at least through the, the third week or the 24th of April. But of our, of our plans above 25 million and roughly 70% of the participants have access. And then when you start to look at what are they actually doing, the average distribution was roughly $18,000 or 23% of their best as account balance. So they're taking out a fifth of their account balance or a quarter, I should say. Obviously I wasn't a match.


Josh Dietch (24:50):

It never, it never flunked out of an actuarial program, but I couldn't do the math to begin with the calculator for that. Exactly. so you know, you can see that it is sort of ramping up. At least that's what we're seeing in our, in our transaction volumes. But paradoxically, what we've also seen is that the loan volumes have gone down. Well again, like this was, this is like I think a safer play for the participant, but you know, it's not something you want to see. And I, and I, and I do think that we are still in the early innings in this. And as you know, sort of economic hardship continues to ripple through, you know, the broader economy, you're see more distributions and that's really a challenge and it's caused us to sort of say, Hey look, we can't come at participants and say, stay the course all is well I don't want to date myself but, but it's that scene at the end of the animal house where Kevin bacon is saying all as well and he gets trampled, right?


Josh Dietch (26:08):

You know, like, no all's not well for many people. And so this may be the largest pot of liquid assets, these people that people have. And I, and I sort of like my crude analogy to all this is this is the broken piping basement. You were, you fixed it and then worry about what it costs. It's interesting. I was, I was reading a I was like scanning my, my Apple newsfeed and there was a story, I think it was in USA today and it was like a financial advice column and it was like, is my financial life over now that I've taken a Corona virus related distribution, I lost my job. My wife still has her job, but the out her hours have been cut. And the last thing I imagined saying to this person is, you know, why'd you do that? You know, don't you realize that the market will recover?


Josh Dietch (27:07):

Of course the market will recover, but you know, at a certain point you all, everyone has to do what they need to do to get by. And in thinking about how we communicate with participants or investors in general, you have to first acknowledge that we're, we're in a little bit of an uncharted, uncharted waters. The fear is real and you have to be able to give them concrete ideas of what their alternatives are. You know, you have to go beyond the markets will recover. It's, did you know that if you owe for taxes that the filing deadline has changed? Are you going to be eligible for for stimulus, you know, what are the things that you can do to change your budgetary outlook so that when by the time you get to the availability of the Corona virus related distribution, it's not your only option that you've thought through the other options available to you. Maybe you're better off drawing down on the HELOC, you know, there are other, there, there are other options.


Rick Unser (28:24):

Well and I think one thing that I've given a lot of thought to and have been communicating with groups that I work with and some that I don't but are in dialogue with is I really think as we emerge from this, the concept of financial wellness is going to be one that is of utmost importance. And I also wholeheartedly agree with you that this idea of, yeah, just hang on, don't do anything. I mean, again for some people that's exactly what they need to do and exactly what they should be doing. But for others that are in more dire financial consequences, where income evaporated overnight, where whether it's, you know, one or both sources of income in the household are now materially impacted. I, you know, there's bills that need to be paid, there's kids that need to be taken care of, et cetera. It's just such a unique set of facts and circumstances that I really like your, your leaky pipe analogy where, Hey, you know what, we're going to get through this.


Rick Unser (29:36):

We have some, we have some assets to do it. And like you said, we'll figure out the consequences. That's where I think the whole concept of financial wellness is going to be very, very important. You know, obviously, yes, there's some people that are gonna go through this quote unquote unscathed in terms of savings. We'll continue investment investing will continue, et cetera. But I think there's going to be other employees, other investors, other companies and their workforces that this has had a very material impact for. And I think as we think about reopening the world, reopening the workforce as people are thinking about their retirement plans, it's how are you going to help your employees rebuild their confidence, rebuild their retirement strategies so that they can see the light at the end of the tunnel or they have some tools and resources to help them as they try to navigate some very tricky waters to, to put their financial lives back together.


Josh Dietch (30:31):

Yeah, we, we've, we've, like we've talked about this a lot internally, it's not just good enough to say, well, if you're saving for retirement, it's identifying audiences within audiences. So if someone is, you know, early in their, in their saving experience compared to somebody who such as myself or you who may be kind of mid career, like we need to hear different things, we need to be given different, you know, slightly different counsel to make the perspective relevant. And we've been really sort of thinking through like how broad does that need to be? And I think you've sort of hit the nail on the head. You know, it's around the concept of wellness. You know, in some ways maybe this is a catalyst event in terms of the adoption of wellness.


Rick Unser (31:32):

Well, in one thing, I think this is a catalyst event for, and please chime in if you feel otherwise, is emergency savings. I think we've, we've talked about that as part of wellness. I think we've, I've, I've certainly talked a lot and written a lot about how I think this is an important element to be part of somebody's broader strategy. Even the concept of having emergency savings as part of a workplace retirement plan design using a true after tax money source. But what I think this is case in point for, why do you need emergency savings? I mean we can debate until the cows come home, how much you need or how many months you need or whatever. But having some pot of money that you can access if there's a true financial emergency. I don't know. I think that's something that should, I'm hoping get a lot of attention and maybe a little more traction as people think about all of this in the future.


Josh Dietch (32:36):

It's hard to come out on the other side of the, I think the other side of that argument is you can find somebody, I'd really like to meet them cause that would be a unique individual. But I think also how you, and this is the wrong word, but how you execute on that at different stages of your life and the reasons why are often quite different. And it's also sort of drawing this distinction between having liquidity and staving off financial fragility. And I think a lot of those things get mushed together. And in some ways it, it, I don't want to say it loses its meaning, but it's hard to understand exactly what we're talking about. So as an example, if I'm 30 years old and I don't have any reserves, you know, clearly you have a, you know, an example of financial fragility, particularly if there's no other sources of potential liquidity such as credit friends and family investment accounts.


Josh Dietch (33:52):

That one can draw upon whatever. Whereas if someone's on the cusp of retirement, you know, you want to have a healthy cash reserve because if something does come up, you don't want to have to sell securities at the wrong time. Yeah. You don't want to sell into a declining market to raise liquidity. So I think you know, to, to, to just basically, I think I'm adding on to your point that I think we as an industry need to think it through more fully as to what exactly we, it means and to whom because I think, you know, there's a whole spectrum of need out there and I think we tend to just sort of cling to the stat, whether it's $400 or a thousand dollars of, you know, your car breaks down. Most people can't raise the funds to address that. The reality is is that most people have some manner, do in fact address it, be sort of figure out better ways for it to be addressed.


Rick Unser (35:06):

No, well said. I think this ties into, or at least I'll make it tie into another question that we've gotten from a lot of employers. One of the primary ones is, Hey, are what, what investment decisions are people making? And you know, are they doing the wrong things at the wrong time, quote unquote in the market? And then I think that the next one is, well, what are people doing with their salary deferrals? You know, obviously if they're in financial distress, if if there's no income, they're not making contributions. But for people that are still getting a paycheck or, or whatever the case may be, what's happening with those salary deferrals? And I remember very early on in the crisis, I had a, you know, a company that I work with reach out and just say, Hey, you know, I've gotten three or four questions already from some of our employees saying that because the market's going down, should I stop my 401k contributions? And that kind of set off some flares in my mind that, and kind of helped with responding to some of that. But I don't know. Are you seeing any massive change or massive move by employees to reduce or suspend their, their 401k contributions as a result of all this? Or is that maybe not, not happening in reality or this on a bra on a broad scale?


Josh Dietch (36:32):

Yeah, I don't have a good read on the, on the answers to that question because I think it's just too early to tell. Certainly if someone's been you know, separated through a layoff or, or, or had their hours reduced, we're, we're seeing that effect. I think it's too early to tell over the long run. We're certainly seeing it differ by industry, by industry because certainly more some industries such as retail or hospitality are bearing the brunt of this to a greater degree than other industries.


Rick Unser (37:09):

Yeah, I would agree.


Josh Dietch (37:10):

And with those and with those clients, we're certainly seeing that impact. But I, but I do think, yeah, just by virtue of the way that we're seeing Corona virus related distributions ramp up, we're at the beginning of this in terms of the participant experience where I think that it's a little too, too soon to to sort of call, call the ball so to speak.


Rick Unser (37:39):

No, good point. And one of the things that we've been doing for the companies that we work with, just getting ready for this next round of meetings and plan reviews is really pulling some basic statistics, just people making investment changes. And I would say that anecdotally what we're seeing very much parallels what you talked about, which is very few changes. Yes, the people that are making changes are going from equities to cash out of target date funds to cash. But again, very small numbers. And then the other data point we've been searching for and trying to identify is that how many people are stopping reducing or otherwise changing contributions. And again, very small numbers in terms of what we're seeing so far. And I take that as a good sign. I take that as something that's positive, but I also take that as something that I think is a little counter to what I've seen in some broader articles or broader posts out there in the retirement plan world of people that are doing massive harm to their longterm retirement strategies because of these poor investment decisions that people are making on mass or this broad movement towards people stopping or reducing their contribution.


Rick Unser (38:59):

So I don't know that that's something else I've been trying to reconcile. And one of the other reasons I wanted to have you on the podcast today was just to maybe refute or rebut some of those headlines that pop up from time to time that, I don't know, maybe there's some data points that they can rely on, but I'm just not seeing those in the, in the broader reality or the broader behaviors of companies that we work with. And, and, and I think you're maybe echoing some of those points as well.


Josh Dietch (39:30):

Yeah, I mean, I, what I would say is if your income is unaffected by this and simply out of fear, you decide that you don't, you're going to reduce your contribution or or, or, or stop them. I'll get on my soap box and say you're doing yourself harm. But I fundamentally reject the utility of telling somebody who's just lost their job. They're there, their spouse or partners lost their job. They're facing real economic hardship. I'm not going to shame them into something that quite frankly, they've got to get their financial house in order before they can consider in investing further. Yup. Yes, it would be the bright thing for them to do over the long run. But you know, sometimes we all have to juggle our short term necessities with our longterm priorities. It's interesting, I've been doing some research, you know, on student loan debt of all things and you know, it's, it's, it's a lot of these things are like, how do I deal with, how do I deal with what's in front of me right now?


Josh Dietch (40:48):

Knowing that I've got this, you know, long dated liability called retirement and sometimes retirement takes precedence and some times you know, living to fight another day takes precedence. And if someone finds themselves without a job, without income, I may not like the decisions that they have to make, but I'm not going to tell them that they're wrong for having to make them. What I can do however is share with 'em. Okay. What's the path forward? Yeah, because going back to my, my, my anecdote about the, the, the question sets into USA Today, you will live to fight another another day. So let's plan for that.


Rick Unser (41:38):

Well said. What do you think comes from this crisis that the industry can do to help employers to help participants? I mean, I think usually we do a pretty good job of learning and then helping other people learn as a result. So, I mean, are some of the main lessons here? Like what you said just, Hey, don't shame people into, Oh my gosh, you weren't saving for six months. You know, you're never going to reach your retirement goals or I don't think anybody's saying that, but just the, you know, from a conceptual standpoint,


Josh Dietch (42:16):

I think the, the, the, the point is, is that we all need to demonstrate a little more empathy and humility in what we do. Don't want to get emotional, but like we have the opportunity, we have the privilege to work in an industry that helps people, you know, face off against one of the greatest challenges that they'll ever face in life, which is making sure that 40 years of working hopefully leads to 30 years of retirement. But that's an awesome responsibility. And if we don't take the lessons that we're learning in, in all of this to get better at what we do, then we've really sort of missed an opportunity. And to make that something more than just, you know, sort of platitudes. To your point, it's like what, we've known this for some time, you don't solely invest your way to retirement secure having a secure retirement.


Josh Dietch (43:23):

You save, you adopt sound financial behaviors, you do a lot of little things. And I think, you know, coming out of this, one of the things that as an industry we need to give strong consideration to is that people aren't going to take giant steps to get out of this. They're going to take little incremental steps. And it's like one of those things like you're, you're, you're, you're in a funk, nothing's going right. And you said to yourself like, how do I get, how do I get from here to there? And it's not a leap. It's little steps and it's when you're no longer thinking about the problem, you realize that, you know, if you're doing these things and then you look back and go, Oh my God, it's a problem. I don't know what happened to him, but it's gone in some ways. Like financial wellness is really about, you know, sort of routinizing those little steps so that you're spending money on what, what, what, what you need, not what you want. You're planning. You can see what's in front of you today without losing sight of what's down the road. And those are the things that I think as an industry, maybe this will afford us, the will provide us the impetus to actually start developing those sorts of things.


Rick Unser (44:55):

I think I would agree with exactly what you said and I think another thing to keep in mind here, and I'm going to go maybe slightly glass half full, I'm going to be a little optimistic in that hopefully as we look at the, this Covin crisis and the financial impact that this has had on people, I think the financial impact and the duration of that financial impact could be Swift but could be deep in a lot of cases. Meaning that this is something that maybe only took a few months to materialize, but it could have an impact that takes years to recover from. And like you said, I would agree that I don't think people are going to be here. I don't think it's realistic to say, okay, you've had this following impact over the last two months, now over the coming two months, just fill the hole back in and move on.


Rick Unser (45:55):

I don't think that's going to be reality. I don't think that in, and even if that is reality, I think, I don't think people are necessarily going to do that. I think there's a lot of things that need to be done, fixed, repaired in people's lives, and again, I think as we come back to that concept of financial wellness, I think it's really going to be inherent upon employers that have had some of these, let's just call it challenges within their workforce where they've had to lay people off. People have gone on furlough, incomes have been reduced, hours have been cut back, et cetera. I think employers, it's going to be incumbent upon them, and I think a lot of people will just think about this naturally as a benevolent employer to say, how do we help these employees? How do we help these people that do to no fault of their own, no fault of ours, have had some major disruption in their financial lives?


Rick Unser (46:49):

How do we help them rebuild? How do we help them repair? How do we help them create that longterm vision again, where they will be financially secure or they will be on a path to retirement. So like you said, they're, their 40 years of work can hopefully turn into 30 years of a stable and enjoyable retirement. I think that's something that, my guess here is that as the world reopens, as the economy reopens, I think once employers get through the, the basic blocking and tackling of what all that means, I think there's a lot of thought that's going to be given to that. And I, my guess is that a lot of these things that we've talked about with financial wellness and people have kind of looked at and said, yep, Oh yeah, this all makes sense. But I think now is where people will really have an opportunity to deploy this and use this strategically to help their workforces maybe a little more and a little differently than maybe people thought about it six months or 12 months ago.


Josh Dietch (47:54):

It's interesting. I want a glass half empty guy and you know, over the, over the last, you know, couple months I'll come across articles in the newspaper and the times or the Boston globe or whatever it happened to be reading. And it'll be about a small business person and how they have pivoted their business to a stay in business. And B, meet the needs of the time. And while we're surrounded by, you know, there's no shortage of I can find the clouds in the sky. Yeah. I don't need a lot of help with that particularly these days. But when I read this stories in some manner, it restores my faith in that most people want good outcomes for not only themselves, but those around them are those that rely upon them. And I think for the vast majority of, of business owners who sponsored retirement plans for their employees that, that, that's in line with, with that way of thinking. And so I do tend to agree with you that this will create opportunities. The challenge is, is that what this crisis has done will cause us each and all to fundamentally rethink about how we live our lives, where we want to go, how we want to get there, what we want to do. And to me that's not going to snap back overnight. Maybe for some, but I don't know about you, but I don't necessarily want to go to a stadium with 60,000 of my nearest and dearest friends in a couple months.


Rick Unser (49:57):



Josh Dietch (49:58):

And that decision impacts a lot of people other than myself. And so, you know, the, the, the in, in, in not in a good way, but where I do feel confident is that there are lots of people thinking about, well, what opportunities does this create in the longer term for new types of businesses, new types of events if you will. And so while our lives may change they will change and, and they won't stay in. And you know, we may not be going back to where we were two months ago, but I have no doubt that we will be moving forward.


Rick Unser (50:43):

That wasn't too half empty.


Josh Dietch (50:45):

It's, it's really against character. I'm really struggling with. It shouldn't be office.


Rick Unser (50:53):

Well we've covered a ton of ground today. I love the stats that you guys have and I think that's really important to get some of those out there. I love some of your thoughts about, you know, what we're learning and how we'll, we'll have the ability to kind of help more employers help more investors, savers, retirement plan participants. What, what didn't we talk about? Or is there anything that you want to reemphasize or otherwise just share as a parting shot before we wrap up and send everybody on their way?


Josh Dietch (51:28):

I think one of the things that I've been pleasantly surprised about this experience is that, you know, for years we and others have invested heavily in technologies to, you know, curate experiences for, for investors, participants if they're in a retirement plan, investors, if, if they're, you know, a, a client of our individual investor business. And you know, when this started to happen, we, we recognized almost immediately that we needed to do things differently. We, we talked about this, you know, stay the course wasn't gonna cut it. We needed to speak directly to our audiences. And what I really been energized about and excited about is the exponential higher rates of engagement among those investor audiences because they're seeing value in the content that's being created for them and most importantly they're consuming it. And so going back to something you said a few moments ago about wellness, well consuming this content is one of those incremental first steps. And so if that momentum can be maintained, I think people on an individual basis will come out of it a lot faster than any of us might recognize. Sure, the savings will take time to recover, but the sound financial behaviors will have developed its own inertia and momentum. And that could be the good that we see out of this.


Rick Unser (53:23):

I like it. Thanks for sharing. Thanks for being here and certainly as you know, as the, as situations warranted or as you guys have more fun stuff to share, I will be I'll be knocking on the door again and hopefully we can we can have you back. 


Josh Dietch:

Sounds great. Thanks Rick. I always enjoy it.

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