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$1 Trillion Dollar Decline in 401(k) and IRA Equities

by Anu

Can our industry simultaneously answer concerns about the recession and discuss long-term investing once the carnage ends? Is there a natural place to consider that overlap? Yes.

Retirement-linked investments! Whether it's a pension, 401(k), 457, or a 403(b) -- Americans have lost ONE TRILLION dollars in wealth, and investment managers need to communicate:

• What's happening now?


• What can the investor do after the recession?

Throughout history (well, at least since marketing communications have been measured), bad times beget communication opportunities. Two great political examples would be Barack Obama's amazing acceptance speech and Ronald Regan's lead communication for re-election.

This speech and advertisement share three attributes of successful marketing communications:

• Examples for people to relate with


• Numerous mentions of unity


• Empathy

Exhibiting these three attributes was not luck. The Obama team and Hal Riney started with the first step: understand your audience. As Asset Managers plan their communication strategy, I'll suggest their first consideration should be fear, or risk aversion.

With regards to an individual's retirement, our industry must recognize the impact of the most dominant, undeniable human emotion -- fear. Humans have greater unhappiness with small losses than happiness from small gains. In economics, this is a study within behavioral finance, and topic called "risk aversion."

Risk aversion should be an important component in the marketing of retirement-linked investment options. It not only possesses the attributes of a successful marketing campaign, but it is relevant to the four constituents' asset managers involve -- plan sponsor, plan administrator, trustee, and plan participant.

I read a great quote from BGI Chief Executive, Blake Grossman, "This is a business opportunity, but it goes beyond that, to almost a moral calling." Some firms are already taking the lead in describing the situation and using the Web to scale that message; AllianceBernstein has a micro-site that describes risk aversion well. Yet too many firms may not be spending the time to understand their audience and communicate effectively.

And when the topic is our nation's retirement, we have to communicate better -- much better.