Recordkeeper Transfers During Volatile Markets

[0:00] JD: BC are you think you're ready to rock? [0:03] Tom Clark: This is the Retireholics Sheltering In Place. [0:10] JD: Okay. [0:11] Tom Clark: All right. [0:12] JD: That is a. That's a new rendition. We've never seen that one, Tom. So it's a little creepy. It's a little. What do you guys. How do you guys feel about it? [0:19] Mark: Sounds like. It sounds like he's in a layer [0:21] Tom Clark: is what it sounds like. [0:22] Mark: As described by Mr. Clark. [0:25] Tom Clark: You know what? [0:26] JD: Go ahead, Tom. [0:27] Tom Clark: One of my first jobs was working at a haunted house in New Jersey when I was a teenager. So it fits. You just didn't know that about me. [0:36] JD: Fun fact. [0:38] Tom Clark: I understand why you don't like living in a dark house. That's right. That's right. [0:45] JD: Welcome, everybody, to another episode of Sheltering In Place with the retireholics and our guest here, Mr. Erisa Attorney Tom Clark. We'll have to talk about that one day. Thank you to all the people attending live. We really appreciate it. You must be some 401k. Hungry animals, the lot of you. And so we appreciate you showing up on Tuesdays and Thursdays at 4:30. We're getting lucky. We've got some good guests because if it was just us talking 401k, it definitely is a shitty webinar. [1:27] Mark: Well, we recorded one with just us and notice it's never been released. So, yeah, if it's just us, it's shitty. [1:36] Tom Clark: Thanks, Tom. [1:37] JD: We did do episode five with no guests and it hit the cutting room floor. We're like, that's a piece of crap. [1:42] Tom Clark: I'm not even sure we had any attendees. Like four. [1:46] JD: Well, yeah, and thanks to the attendees. Good point, Mark. It's a lot less creepy when we do this with other people watching as opposed to just ourselves. So we appreciate it. But let's dive right in with Mr. Clark. I've been wanting to talk about this. If you're a Planet vi. Oh, shoot. Let's. Sorry. [2:06] Mark: He was going to go there. [2:09] JD: Get so excited to talk. 401k. If you've got questions. If you got questions for Tom, questions for anybody here, use that chat bar. Justin over there is checking it out. He's paying attention to you and watching it. We really appreciate your involvement and we will also. We're going to go back to the old school game, the prohibited word. And today the word will be sponsor. So if you say that word, you must drink from your special drink. Okay? And we've had Tom on the show before. He's kind of a veteran at this. He's really good at it. Last time Here we are in the midst of this coronavirus and a lot of plan advisors are out there working with their clients or they were in disabled December and January and February and they had maybe sat down, done a review of the plan and determined that it was time to move from record keeper X to record keeper Y for a variety of reasons. Maybe the switch was going to happen on March 20th or you know, April 10th. I don't know what is the. Or what is, what is your guys's opinion? Is that something that they can keep moving forward with and make that switch? Or, or is it because of this Covid? They should not. And maybe I should say more specifically because of these like extremely volatile markets. Let's start with our guest Tom. What's your opinion? [3:36] Tom Clark: You know, it's one of those things, right? Really depends on why you're moving. If you're trying to get away from a really bad record keeper who's making a lot of mistakes and, and you just, you need to get to somebody who's doing better. I can see more of an argument if you're moving between two really sophisticated record keepers who are good at moving assets quickly. Right. You would only have those assets out of the, you know, playing field for a couple days, you know, maybe as opposed to some of the record keepers, you know, out there take a heck of a lot longer. You guys would know that that's your sort of day job, those kinds of transitions, but not that I think ERISA requires it. I think you could do it, but for those risk averse folks out there, if you don't have to do it right now until we really stabilize, I could see an argument for parking your plan right where it is. If somebody made that decision and they documented that and said we really think that the volatility scares us. What happens if the market goes up? Look, right today didn't go up a bunch and now it's, you know, there. Did it go back down again today? [4:46] JD: Yeah, it's down. [4:47] Tom Clark: An article that says April is the best month in a long time because of how bad March was. Right. So if any given point in April you had decided to pull your plan and do a blackout and that's the one day you missed where the Dow gained a thousand points. You know, you're going to have people calling you up and those squeaky wheels are going to be pissed off. So I can see why people would do it, but I don't think it's mandated. But I can see why people would be concerned. [5:13] Mark: Seems like the defense of saying we chose not to move because of the volatility is easier than the defense of saying we moved. And we had this massive downturn, and now all our employees are calling the dol and voicing complaints. Well, it would be like, it's easier [5:29] Tom Clark: to do, but it would really be the opposite because if we pulled all our money out and then the market dropped further, everybody would be happy as a client. [5:36] JD: Right, right, right. [5:37] Tom Clark: For sure. So it's the upswing that's crazy. [5:41] Mark: It's when the money's out of the market. [5:43] Tom Clark: Yeah. It's the climb that's the scary part. [5:45] JD: To me, we're always dealing with up and down days. To me, it's the volatility. It's the amount that things are up and down that creates this new narrative because we always deal with that. And you get clients that complain about that in a regular time when they go through a transfer and the market has a couple great days and they're like, holy cap, what happened? We shouldn't have done this at this time. You're like, well, you can'. [6:07] Tom Clark: That. [6:08] JD: When I looked at Napa, their results, they had 44% of advisors that they pulled said that they were still on schedule to do these transfers. So it seems like the advisor community and. Or the clients they represent doesn't necessarily agree with the concept that you have to put it on ice, or at least a good chunk of them. Let me shift gears a little bit on the same subject. But what about the participants? They're in the midst of these crazy times. Maybe you've furloughed part of your staff. They're busy watching Fox News and CNN and are stressed out. Could you make the argument that just given the current environment, I mean, stock market aside, that making a switch from one vendor to another vendor, I mean, the education, the ability to answer their questions, is it just not a good time to do it or is that just being too heartfelt? [7:03] Tom Clark: You want to go to me or anyone? [7:04] JD: Yeah, sure. Well, Mark and Justin tend to not answer my questions very often. So. Go ahead, Tom. [7:11] Tom Clark: No, I mean, I think that's a fair. Like a lot of things in our world, we try to presuppose what people are going to be thinking and what environment they're in and where their heads are at. And no, I really do feel that's a very fair assessment. Again, it's not a mandated one, but if a plan sponsor said to me, you know, you're right, I just cut everybody to 50% furlough pay, like the last thing in the world they need is a bunch of notices that were switched X to Y because they're already pissed off at me. They're already scared. You know, they're already hurting. And now they think I'm going to try to steal their money or there's some weird thing going on. You just, you just don't need to stress people out. [7:49] JD: Can we talk about the opposite of the argument here? Just for all the attendees listening in. I mean, if you feel as though you should move forward or you're part of that 44% of those advisors I referred to, I think that one of the, your concerns is, and I'm stealing this from Nevin, but that you're kind of stating out loud now that you want to time this thing when markets are better. Like you have some idea when markets are going to be less volatile or there's a better chance for that down day versus the up day. And maybe that's a bad message to put out there as a, as a fiduciary. And so you made these decisions. I'm just being going on the other side of the coin now. You made these decisions for reasons they obviously had to be prudent reasons and fiduciary sound. And maybe some of them are very, very important. I mean, you've decided to upheave this entire plan and move it. So just because you're forced with this landscape, does that trump all of those reasons that you were moving? And I guess that's really what it comes down to, right? Which, which value is, is better? The previous decisions or the fear of the current volatility? Is that a fair assessment? [8:56] Tom Clark: I mean, it is, but, you know, putting on the old tom hat, right. I could sue you for anything, including being ugly. So, you know, watch it. [9:07] Mark: That's for you, Mark. I know. He looked at me when he said it. [9:10] Tom Clark: Easy money. That's right. I'm looking right at you. You know, it's so J.D. i mean, you're 100% right. You could easily come to the opposite conclusion. But all that being said, if the market goes up and somebody misses that gain, especially if they've got a more aggressive portfolio, that person is going to be knocking on your door. And I have been in those situations, even under the best of circumstances, where somebody loses something over 48 hours and you know, and in the end they're not. It doesn't make any sense to pay me to defend a claim when the Entire claim is $1,500. They're going to pay me at my hourly rate. And the plan sponsors. Just write the check and no.