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10 Years ‘After,’ Part II – Some Lasting Good

A decade ago this past weekend, Lehman Brothers filed for bankruptcy. Shortly thereafter Merrill Lynch sold itself to Bank of America, and AIG reached out to the Fed for a bailout. In this second excerpt from the fall issue of NAPA Net the Magazine, seven of the nation’s leading advisors look back at the 2008 financial crisis.

Some lasting good did come out of the market crisis. Reflecting now, Troy Hammond says the industry did pretty well before then in educating participants about the inevitability of market volatility — but didn’t do a good job giving people actual solutions to withstand it. “What that time taught us is that education is not enough,” says Hammond, founder, president and CEO of Pensionmark Financial Group in Santa Barbara, California. “We needed to do more to build backstops, and it drove us to think about protective solutions that help us to manage participant behaviors.”

That realization coincided with the arrival of the Pension Protection Act (PPA), which gave employers a clearer pathway to implement automatic enrollment and a QDIA (qualified default investment alternative). “Automatic plan features have done wonders,” Hammond says now. “There is probably no single set of tools we as advisors use that has had more of an impact on plan success than those.”

And Steve Ulian, managing director at Bank of America Merrill Lynch, traces the roots of employers’ current interest in employees’ holistic financial wellness to the market crash. “Prior to the crisis, when retirement providers talked to sponsors about letting us come in and talk to employees about their full financial picture, there was less enthusiasm from employers,” he says. The crisis started the momentum to change that, and he calls it the “silver lining” of the experience.

“Employees did realize, ‘Oh my gosh, this 401(k) account is the biggest savings vehicle I have, and I need help.’ And employees made clear to their employers that they expected help from them. All the talk now about financial wellness is a result of the crisis, and employees asking for help from their employers. Now, plan sponsors are much more open to letting us provide that help.”

The rest of this four-part series can be found here:

Judy Ward is a freelance writer who specializes in writing about retirement plans.