Recordkeeper Challenges: CARES Act & Market Volatility

[0:00] JD: Welcome everybody to another episode of Retireholics sheltering in place. And as long as this Coronavirus COVID 19 BS is around, we will still be coming at you live on Tuesdays and Thursdays at 4:30 Pacific. And here we are again. And we've got Bill. Mr. Bill. Oh, no. Harmon. From. From Voya. The president of retirement corporate 401k market. Boy, that title slides right off my tongue. But welcome, Bill, to Retireholics. Have you seen the show? Do you have any idea what you've gotten yourself into? [0:44] Bill Harmon: I have seen the show and a couple different versions of it, but no, I don't know what I've gotten myself into. And I think I had someone on my team probably volunteered me for it. So I don't know if that means I won a bet or I lost a bet. I guess we'll find out at the end. [0:59] JD: I definitely was a little worried about you and everyone seemed to be signing you up for this thing, but we're really glad to have you. We've had lots of different guests on the show, but I hopefully I'm not offending anyone. I can't recall having someone in a position like yours at a large record keeper. And so for us, as 401k nerds who live, breathe and sleep this stuff, it's gonna be fun for us to pick your brain a little bit. [1:24] Bill Harmon: We got some. Oh, geez, Justin, put that away. God. Yes. You're a horrible person, Justin. [1:33] JD: Thank you, Justin. Listen, nobody likes our banter, Bill, except for us. So let's dive straight into some subject matter. [1:40] Bill Harmon: No, no, no, no, no, no, no, no, no, no. We're not skating by that. This is too good. Chad is the ultimate professional. The ultimate. Justin, you're about to. I was young once. This is grounds for termination. [1:55] JD: Popular, though. That's impressive. [1:58] Bill Harmon: I've known you too long, Justin. Look at all the bottles up top, though. I want to point those out. [2:03] JD: Perfect. Also, we're going to play a new game. There is a word of the episode that I have emailed to you. Retireholics. Bill has no idea what that word is. If he says the word. We will play kind of a zoom version of that old college game where someone puts their thumb on the table. The last person to put their thumb on the table has to drink. But we will do it with the virtual background that we've set you guys up with. So I'll give you an example. You have to go quickly to the. I'm not going very quick. So I'd lose the game. The virtual Background. The last one to do it would have to drink. And it looks like Brandon might be playing along with us too. We'll see. And what do you drink? You don't just take a sip from your Coors Light or your fancy beer that you're drinking. Hopefully you've got something nasty sitting around. Justin. [2:56] Bill Harmon: Nasty. I've got good scotch. [2:58] JD: Looking forward to it. Okay, so that's the deal. So, Bill, be careful with the words that you choose. And I gotta remind myself what the word is I remember. Let's dive right in. Talk to me about this crazy time that we're in. Again. Obviously, from your perspective, what are you seeing at Voya in terms of participant behavior with this market volatility, the uncertainty of the economy? You guys have, you know, I've only got 750 plus clients. You've got tens and tens of thousands. 40,000, 50,000. I don't know where your numbers at these days, but you must get some pretty interesting statistics. [3:36] Bill Harmon: And. [3:37] JD: And I'd love to know if they're recent, you know. So what are you guys seeing? [3:41] Bill Harmon: Yeah, we looked at, we were looking at participant behavior through Q1. So, you know, granted that's got pre and during, you know, like initial announcement and then right into March. And we looked at behavior and, you know, obviously we're all saying, stay the course, stay invested. [4:00] JD: So [4:02] Bill Harmon: what we did see is that participant behavior is doing a lot of that and that we're seeing that they are participant, participant, participant. Is that the word? He's quick. [4:16] JD: Okay. Okay. This game's not going to work. Yeah, you can keep talking. [4:22] Bill Harmon: But we did say they are staying the course. And that's the good news, is that we only saw 3% of our entire retirement population make an investment change during that first quarter. And we only saw 2.1% change. Future allocation. Investments in future allocation. And that's compared if you look at that same time period in 2019 as 1.3. So it goes from 1.3 to 2.1 during a really turbulent time. And granted, we've got more valuation to do as time goes on, but we are seeing that participants are staying the course. We also did a survey of just consumers in general, and we found that individuals are also thinking about emergency savings. They're thinking about, you know, should I spend money on sort of excessive items, some luxury items, and they're holding back on that. And actually they're thinking about emergency savings. So those are two of the top four items that people are spending time on during this kind of this turbulent time. So that's good. We've been talking about participants, employees. You ought to think about Americans in general. You ought to think about emergency savings. And they are. So that's good. [5:44] JD: Sorry, I'm trying to pay attention to this guy and I'm so consumed to this game we got going on. [5:48] Bill Harmon: Actually one, there was a participant. Was it employee? It keeps flying. There it is. [5:54] JD: JD we're still playing don't touch your face, right? Sure, I guess. [5:58] Bill Harmon: Don't touch your face. Ding dong. [6:01] JD: All right, Bill, so let me ask you, you get all those formal reports in and you see those numbers and you don't see like a lot of stuff changing that much, which is very comforting. And by the way, I've seen the same thing with my much smaller population. We've had a lot of inquiries about COVID related distributions, but we haven't actually been transacting a whole bunch. But, but if all that data's kind of ending end of March, this whole CARES act thing and stuff is coming after that, you have to have your finger on the pulse of what's happening there beyond the fancy reports. What are you guys seeing from a Covid distribution standpoint? And I know you had to get all your stuff lined up, but just gimme some thoughts on that area. [6:40] Bill Harmon: Yeah, well, there's a couple things. And for one, the largest piece of legislation comes out as far as dollar amount and so on. That massive legislation that comes out and it goes live the second it's signed. You know, and so if you think about Secure act was kind of a, you know, we were hustling on Secure act and at that point we had, what was it? I think we had a little over a week to respond to it, which is crazy. And now this one goes live the second. So there's a ton of questions. You know, we, we thought, we took a couple stances. If you look at the whole funnel of decision making, one is as an employer, do you want to adopt those provisions? And there are a lot of different opinions on that. And we thought long and hard. Well, long and hard, you don't have a lot of time to think about it. It went live right away. So we said, well, you know what? First of all, 90% of our small market, small mid market plans work with TPAs. So the TPAs really own the plan document and plan provisions. We probably shouldn't make that decision. We should leave that up to the company, the plan sponsor and the tpa. So we then we thought about larger plans where they're more complex and you have A lot of different things to think about, particularly when you get tax exempt and multi vendor. So we said, you know what, we're gonna, we're gonna go and take an opt in. I'm not gonna force anyone to make any decisions quickly and I make that statement. J.D. because you know, they have to first make that statement in order for us to go ahead and say, well, what are we going to do as far, what are we gonna see as far as these CRDs? And so we're still really early in the process. We track the calls that come in for inquiring about CRDs and they're coming in. I wouldn't say that they're coming in and accelerating, but they're coming in. So I don't, it's too early to see if we're seeing this mass exodus and everyone's taking the CRDs or any other types of distributions, loans, hardships and so on. [8:43] JD: Fair enough. [8:44] Bill Harmon: Yeah. [8:45] JD: Because I feel the same way. We haven't seen it yet, but we got to still keep monitoring this and see what's happening. And by the way, I want to just from the industry say, hey, sorry for the quick call to action on you record keepers. I want you to know we all understood that when that sucker was signed on Friday. And then you're waking up Monday morning and supposed to put things in place and it's impossible for you to do that. So I think you and a lot of your peers have done a phenomenal job, you know, hustling and trying to put stuff in place. And I think we also understand if your advisor's tuning in, you need to understand that, hey, there's gonna be some bumps in the road too, you know, like we're gonna have to sort through this and do the best we can. But it sounds like as of today, middle of April, as an industry, we are not seeing a huge tsunami of distribution requests at this time. [9:36] Bill Harmon: I think just mostly inquiries, which is good. I want to have the conversation. You know, we, we made a decision early. In fact, we were even thinking about this pre Cares act, but we wanted to see what it was going to do and say. And so.