Nevin's Data "Points"

Will your portfolio be fortified by a 49ers win – or get chipped by the Chiefs? That’s what adherents of the so-called Super Bowl Theory would likely conclude. The Super Bowl Theory holds that when a team from the old National Football League wins the Super Bowl, the S&P 500 will rise, and when a team from the old American Football League prevails, stock prices will fall. It’s a “theory” that has been found to be correct nearly 80% of the time – for 40 of the 53 Super Bowls, in fact. Not that it hasn’t had its shortcomings. One need look back no further than last year’s win by the AFC’s New England Patriots over the NFC champion Los Angeles Rams to find an exception – the S&P 500 was up more than 30% in 2019. And then it was just the year before that a win by the NFC champion Philadelphia Eagles against the AFC Champion Patriots (who once were the AFL’s Boston Patriots) also turned out to be a loser, marketwise, with the S&P 500 down more than 6% (though...

Major League Baseball recently showcased its best and most popular in the “Midsummer Classic,” better known as the All-Star Game. Purists can (and have) taken issue with the involvement of the fan vote, the intermittence of the designated hitter rule, and the impact that this contest can eventually have on the home field advantage in the World Series. Still, even casual fans of the game can relish the opportunity to see so many great players together on the field for one special night (those who don’t care about baseball can perhaps relish the fact that for a couple of days, there won’t be any baseball games or scores with which to contend). It has been my good fortune to have had the opportunity to spend my entire career working with employee benefits, in a widely varied range of capacities. It has also been my great pleasure over those years to meet, and in some cases, work directly with, some truly talented people—who care deeply, passionately, about helping others enjoy bette...

Our industry pays a lot of attention to the investment choices that retirement plan participants make; we fret about the type and number of choices on their investment menu, the efficacy of target-date funds, the utilization of active versus passive investment strategies, and the prudence of the asset allocation choices that individuals make—with or without the benefit of tools and/or professional guidance. Unfortunately, once they leave that part of our private retirement system, not so much. A significant percentage of that retirement plan money winds up in individual retirement accounts, or IRAs. In fact, today IRAs represent more than a quarter of all retirement assets in the U.S., according to a recent EBRI Issue Brief. But there remains a limited amount of knowledge about the investment behavior of individuals who own IRAs, alone or in combination with employment-based retirement plans. In order to fill this gap, EBRI has undertaken an initiative to study in depth this con...

By some accounts, inertia has long been the bane of the voluntary retirement system—and a great deal of money and time has been spent overcoming the reluctance of workers to become savers, and of savers to do so at levels sufficient to achieve their retirement goals.   That same inertia likely accounts for the fact that, once set on a savings course, or better still, set on one that improves on that initial setting, 1   participants in overwhelming numbers appear to “stay the course”—and do so through good times and times that aren’t as good.   So, what happens to those participants who stay the course, those “steady,” consistent participants?    The Employee Benefit Research Institute (EBRI), through the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, has long tracked the changes in consistent participant accounts in a database that is the largest, most representative repository of information about individual 401(k) plan parti...

There could be a lot more riding on Sunday’s Super Bowl than you think. If the results of the Super Bowl exert any influence on the markets – as proponents of the so-called Super Bowl Theory claim – then 2012 could prove to be truly tumultuous. For the "uninitiated," the theory (invented/popularized by the late New York Times sportswriter Leonard Koppett) says that a win by a team from the old National Football League is a precursor to rising stock values for the year (at least as measured by the S&P 500), but if a team from the old American Football League (AFL) prevails, stocks will fall in the coming year. This year we have a team from the old NFL (the NY Giants) taking on one from the old AFL (the New England Patriots, who once were the AFL’s Boston Patriots). So, if the Giants prevail, 2012 should be a good year for stocks – and if things go the Patriots’ way, well… On the Other Hand… Of course, as even loyal proponents will admit, this theory used to work...

I was in London for a few days last week, and while it afforded a good opportunity to visit with a number of providers in the European retirement plan market, the primary purpose of my trip was to acknowledge the fund manager and consultant standouts recognized by PLANSPONSOR Europe (which has just celebrated its one-year anniversary). The luncheon itself was fascinating: As is often the case with such gatherings here, many of the attendees were well-acquainted with each other, a number had common employment histories and, as in the U.S., even those who worked for competing firms at the moment seemed to sense that it could change at any time. Once we got past the potential impact of the latest Icelandic volcanic ash cloud, the traffic disruptions attendant with President Obama’s visit (which, of course, had been impacted by the latest Icelandic volcanic ash cloud), and the beautiful weather (which, fortunately, was apparently completely unaffected by the latest Icelandic volcanic ash c...

Somewhere over the course of your academic or professional career, I’m sure you’ve been exposed to a group exercise dealing with being stranded in an inhospitable place (the moon, or maybe a deserted island) with a limited amount of supplies, and a limited amount of time to choose from those supplies to ensure your survival. In these exercises, you’re asked to make those picks as an individual exercise, and then put together with a group to make group choices. Not only are the group choices generally different, they are nearly always “better” (more likely to ensure survival) than those made by individuals. The point of the exercise is, of course, that we make better decisions working together as a team than we do trying to make them on our own—and it generally works out that way. Sure, that may work in hypothetical situations where none of the group members has any particular expertise. But if I’ve crash-landed on the moon, and there’s a trained astronaut in the group—well, let’s ju...

Having recently had a couple of new members join our 401(k) investment committee, I asked our investment adviser to conduct a briefing so that the new members – and those already serving on the committee – would have a better understanding of the responsibilities of being on that committee. Most of that session focused on what was expected of them: the requirement to act solely in the interests of plan participants and beneficiaries, the importance of process (and documenting that process), and the implications of the prudent expert rule. However, aside from the obvious motivations in helping my co-fiduciaries know what was expected of them1, at the conclusion of our session, I tried to summarize for our committee three things I think every investment committee member should know—and that, IMHO, kept top of mind, serve to keep an appropriate focus on those responsibilities: You are an ERISA fiduciary. Even as a small and relatively silent member of the committee, you direct and influ...

In a very real sense, this has been a “rebuilding” year for many plan sponsors and participants: a time spent rebuilding account balances, resurrecting and/or reviving employer matching contributions, a time for shoring up participation rates, and—in some cases—restoring trust. The markets, overall, have been sympathetic to those causes, but in many respects, the still-soft economic trends doubtless weighed on the kinds of dramatic trend shifts that we have seen in recent years. That said, only a quarter (24.9%) of some 6,000 plan sponsor respondents said that “all or nearly all” of their participants were deferring enough to take full advantage of the employer match, a reading that declines sharply with plan size. Additionally, participation rates were roughly flat with a year ago; with responding plans reporting a combined participation rate of 71.5%, compared with 72.3% a year ago. The median participation rate was also lower; 75.0% in 2010, compared with 78% in last year’s surv...

While the markets were in an apparent freefall last week, I could hear former Treasury Secretary Hank Paulsen on the TV in the next room telling (lecturing?) the Financial Crisis Inquiry Commission that the problems that led to the 2008 meltdown could, and should, have been dealt with sooner, and that we could, and should, have moved faster—and with more to stave off the crisis. The criticism then—as it was last week in Europe—was that this was a time to act, not to think; that if we didn’t act—act now, act decisively, and without question—well, the results would be catastrophic. It is a theme that runs through Paulsen’s recent book, “On the Brink,” as he drags the reader from one impending crisis to another during those fateful weeks of 2008. In Paulsen’s retelling, those who back his “need for speed” are thoughtful and prescient; those who don’t, well, their motivations are generally painted as either blinded to the seriousness of the situation or hopelessly ideological. From the...

10 Things You’re (Probably) Doing Wrong—or Not Doing Right—as a Plan Fiduciary Being a plan fiduciary is a tough job—and one that, it’s probably fair to say—is underappreciated, if not undercompensated. In my experience, most who find themselves in that role (see “IMHO: Duty Bound”) I think do an admirable job of living up to the spirit, if not the letter, of their responsibilities. Nonetheless, there are plenty of areas in which we could do a better job, and the purpose of this column—and the one will follow it next week—is to focus on those issues that come up regularly in my discussions with plan sponsors, advisers, and industry experts. A couple of disclaimers up front: first, if you’re taking the time to read this, odds are you are probably doing a better-than-average job as a plan fiduciary. Second, you may well be able to identify things that are not on this list. This is a list compiled based on three decades of experience working with retirement plans; numerous conversation...

As a kid, I remember sitting in church listening to a sermon about what I have since come to know as the “parable of the talents,” found in the book of Matthew in the New Testament. Now, for those of you who slept through those sermons, the story (1) is about a man who is going out of town and gives three of his servants different amounts of money to hold for him while he is gone. The first is given five “talents” (2) , and on his master’s return, he proudly gives him back the five he was left with—and another five! The second servant, who was left with two, returns those to the returning master—and two more besides. Both of these servants are commended and given more responsibility. However, the third servant, who was only entrusted with one talent, tells his returning master that, knowing his master was the demanding type, he opted instead to bury his talent, so that he could return it safely—which he does. For his conservatism, this poor guy is called wicked and lazy, has the ...

In recent weeks, those favoring a government solution to the issue of retirement security/savings have championed the soundness of Social Security. Despite (or perhaps because of) a recent Trustees report that revealed that the markets had taken a toll on Social Security’s finances, Alicia Munnell, director of the Center for Retirement Research, noted, “The system has enough money to pay full benefits for decades, although for a few years less than previously reported because of the financial/economic crisis.” And so it has. The same thing is true of the nation’s private pension plan insurer, the Pension Benefit Guaranty Corporation (PBGC), and in fact that point was made repeatedly by Charles Millard, the former director of that agency, as he was repeatedly questioned about the wisdom of championing a new, although hardly radical, IMHO, asset allocation shift that would have resulted in an asset allocation of 45% in fixed-income, 45% in equities, and 10% to alternative investment c...

The recent market tumult has hit Main Street in its retirement pocketbook—and some are once again fretting about their “201(k)s.” You can say all you want that this is a good buying opportunity, but the reality is that our retirement savings accounts have taken a hit, and most people are going to be in mourning, at least for a time. Regardless of the markets (which we can’t control), we all know that the most important determinant of retirement security is how much we save—something we can, within bounds, control. However, when it comes to saving, there are two big questions looming over us, IMHO: Are we saving enough?—and, more importantly, Can we save enough? Those of the opinion that Americans are saving enough are few and far between. With a median retirement savings plan balance of less than $125,000 (and that was before the impact of the last several weeks), it’s hard to see how we could be saving “enough” based on historical spending patterns, much less taking into account t...

For most 401(k) plan participants, this has been a good quarter—to lose your statement. Sure, we all know that the lower prices make this a good chance to invest new contributions at a bargain price (once we get past the concern that those prices won’t continue to fall), but there is a very real possibility that some (many?) participants will see a 09/30 balance that is lower than it was a quarter ago, wiping out three months’ worth of contributions (and then some). It is interesting—and perhaps fortuitous—that, even as the markets struggle, asset allocation choices are available on a growing number of retirement plan menus. That they are increasingly a favorite as a plan default option—even as a growing number of automatically enrolled participants are defaulted into them—represents, IMHO, one of those rare occurrences where a much-needed solution is actually available and in place before the crisis it is designed for hits. Having said that, it is also a year when even diversified po...

It was an interesting week, to say the least—all the more so since I spent it surrounded by financial advisers. The downs and—eventually—ups of the market, the absorption of storied brands, and the likely disappearance of others were, as you might imagine, fodder for a lot of cocktail banter and the occasional moment of financial gallows humor. But, after what is surely one of the most momentous weeks in memory, the question for most is—now what? IMHO, most investors realize that stock markets will go up and down—even, as was the case this week, when those movements are deep and largely unanticipated. Those who rode out the tumult are doubtless relieved that they did (having the wisdom to “stay the course” is a time-honored rationalization for inertia). As one adviser told me, the only person that gets hurt on a rollercoaster is the one who tries to get off in the middle of the ride. On the other hand, when malfeasance and/or malevolence seem to underlie those dramatic swings—and ...

If you’ve been asked in the past two weeks what to do about the market (and who hasn’t), I’m sure your response has been something along the lines of…“Nothing.” There are, of course, more eloquent ways to express that sentiment. And, let’s face it, when it seems that everyone is asking that question – it’s generally well past the time when it is prudent to try and do something. Still, it seems that throughout my professional career, every time the market plunges (even when it stays down for an extended period), the pundits all seem to say the same thing; “the fundamentals are sound,” “we’re going through a period of short-term volatility”, sometimes even that that period of “short-term volatility” was anticipated (apparently even an innocuous footnote about the possibility of such things “counts”). Naturally, we’d all like to believe is that we don’t need to do anything in these times of - “uncertainty” - because, well ahead of the current tumult, things have already been done to p...

The past year has brought with it an extraordinary amount of change to our industry. And yet, I have yet to meet an adviser—in any setting—who isn’t brimming (some are even bubbling) with enthusiasm for the opportunities they see for their business in all this change. That’s a very different perspective than I hear from their plan sponsor clients. Not that plan sponsors aren’t appreciative of positive change. It’s just that, as a general rule, my experience has been that plan sponsors are significantly more likely to associate change with work, rather than opportunity—and with some justification. Consider the recent finalization of regulations on the qualified default investment alternatives (QDIAs). Plan sponsors finally have some reasonably clear definition of what constitutes an appropriate default investment choice (at least according to the Department of Labor), one that provides a fair amount of flexibility for the sizeable number of plans that previously relied on a stable v...