Senior Advice Strategist, Institutional Investor Group
Mr. Wolf is a senior advice strategist in Vanguard Participant Advice & Wellness. His focus is consulting with plan sponsors and consultants on Vanguard's advice and guidance offers for retirement plans. Most recently, Mr. Wolf served as head of Investment Services in Vanguard Financial Advisor Services™, leading Vanguard Advisor Portfolio Analytics and Consulting, Vanguard ETF® strategic model portfolios, and a team of national speakers responsible for sharing Vanguard thought leadership. Previously, Mr. Wolf led a team of senior financial advisors providing discretionary advice to Vanguard's highest-net-worth individual investors and their families. Earlier in his career, he was an investment analyst in Vanguard Portfolio Review Department, a relationship manager to nonprofit clients in Vanguard Institutional Asset Management, and a retirement education specialist in Vanguard Participant Education. Evan earned a B.A. from the University of Virginia and an M.B.A. from the Wharton School of the University of Pennsylvania. He is a CFP® professional.
This time of year, I’d like to think you’re sitting on the beach sipping a Coco Loco1 rather than reading this—or maybe you’re reading this while sipping a Coco Loco on the beach—that I could get behind! But instead, you may be wondering: Is my retirement plan advice provider doing everything it should to navigate these uncertain, volatile times?
I thought it would be best to go right to one of Vanguard’s foremost experts for some perspective. So I reached out to Anatoly Shtekhman, global head of Advised Portfolio Construction, who shared this:
If you hear from nervous participants wondering why their managed accounts aren't being repositioned or tactically managed, I'd tell them that I understand it's tempting to engage in market-timing. Many investors are lured into thinking that they can make quick gains by buying low and selling high. However, it is important to recognize that market-timing is a challenging journey that even experienced investors struggle with.
Instead of trying to time the market, make sure that you have an appropriate strategic asset allocation—because that's what will drive the majority of your return variability.2 Focus on your long-term asset allocation and create a well-diversified portfolio across different asset classes. When you do, you'll benefit from the power of compounding, and you can potentially reduce short-term portfolio fluctuations that are a by-product of market volatility.
Concentrating on sound investment principles, exercising patience, and deploying a risk framework can lead to better investment outcomes.
So, if we’re not tactically adjusting participants’ accounts based on short-term ups and downs, are we just sitting on the beach sipping Coco Locos? (You can probably tell what’s on my mind ... ) Certainly not, and we want to make sure that participants feel safe and comfortable knowing their hard-earned savings are being managed appropriately.
Advice from Vanguard delivers:
- Clear education and setting appropriate expectations up front and along the way. When participants explore our advice services, whether digitally or speaking with a call center representative or financial advisor, we help them understand our long-term, strategic, low-cost approach to portfolio management.
- Timely outreach during trying times. Throughout 2022, we sent thousands of emails to our advised clients. We shared views from our CEO, chief investment officer, and chief economist on the markets and economic events. And we reminded our clients about our disciplined, long-term investing strategy.
- Behavioral coaching and support from human financial advisors. Sophisticated advice technology is great (we should know, we’ve invested more than $1 billion in it over the last few years), but sometimes being human, we just want to talk to another human. We believe that these human interactions, whether one-time or ongoing, are a very valuable aspect of an advice program because they provide emotional support, coaching, and nuanced planning.
Building on that last point, I thought it might be fun to introduce you to one of our financial advisors who works daily with participants. Kimberly Bielous, CFP®, kindly took a break from her clients to answer a few questions:
Q. The last few years have been volatile and eventful, to say the least. What are the most common questions and concerns you hear from clients?
A. As a financial advisor, part of my role is to serve as a behavioral coach and provide emotional support for my clients. That means when volatility in the markets is high, I’m focused on patiently listening to my clients to understand the source of their concerns. My goal is to be the calm amid the storm.
Many times, these fears and worries share a similar sentiment:
- Could my portfolio really go to $0?
- Can’t afford to lose any more money. I don’t have time to recover.
- Should I change my investment strategy?
- This time, it’s different.
Q. What's your best advice when clients ask about moving to cash or making other tactical adjustments in response to perceived opportunities?
A. First, I acknowledge that their concerns are valid. The news is filled with headlines that can cause anxiety and stress and make anyone lose sight of the long-term perspective.
I often ask, “What has changed in your life?” Most of the time, it’s the volatility that’s driving clients to abandon ship (move to cash) or steer another direction (make tactical changes) away from their current strategy. I refocus them on their destination. I reassure them that the plan we created before, when markets may have been calmer, is a plan made to weather the storm.
Deciding to stay the course is an action they can take. Rather than trying to control external factors, I give the power back to my clients by revisiting their plan and discussing planning opportunities that get them closer to their goals.
Q. Can you share a moment that highlighted the value you bring to clients?
A. Periods of market volatility present valuable opportunities for us as financial advisors to provide our clients with behavioral coaching. As we know, volatility in the markets is inevitable. However, there are periods of heightened volatility and investor concern, especially when an event may happen for the “first time”—like the potential for a U.S. debt default. Many of my clients wanted to know what a default meant for them—what actions they should take in their accounts and how I was managing and protecting their portfolios.
One client told me that she was losing sleep over all the news. She was so worried about running out of money like her parents that she was ready to cash out her life savings and hide it under her mattress! She had trusted Vanguard with her life savings and had no one to lean on financially except for us.
After listening to her concerns, I encouraged her to create a spending plan. Then we explored ways to reduce her discretionary spending. This gave her extra money to build up her emergency savings. She said focusing on her spending plan gave her back control over her finances.
Because she needed someone to guide her through the uncertainty, we agreed to meet monthly. These meetings helped her stay accountable to her spending plan and reassured her that she was on track to meet her goals. After the debt ceiling agreement was reached, she thanked me for being her voice of reason.
Her words are what all advisors strive to hear:
Hopefully, I have successfully demonstrated how we’re helping your plan participants stay on track and put their mind at ease—whether through our thoughtfully crafted methodology, our digital coaching, or our expert advisors. Here’s my summary of the key points and takeaways:
- Markets (and the world generally) have been challenging and unpredictable the last few years. But that doesn’t mean your advice provider should be changing their approach to try to take advantage of perceived short-term opportunities.
- Vanguard takes a goals-based, strategic, and long-term approach. This has worked well for us and our clients for decades. Other managed account providers may take a more tactical approach. That could be fine, but I encourage you to ask questions about their philosophy and process for when and how to make shifts, as well as their track record navigating past volatile periods.
- The human and emotional aspects of advice matter a lot in times like these. We believe it’s critical for participants to feel valued, cared for, and assured, regardless of the difficult external forces.
I hope you have a fun and relaxing summer. If you find yourself enjoying a frozen drink on the beach, please take a sip for the Advice Guy.
Comments?
Ideas for future blog posts?
1 Many variations exist, but one popular version is a frozen drink with coconut rum, pineapple juice, orange juice, and bananas.
2 Source: Vanguard’s Principles for Investing Success, 2020.
* The Associated Press. “How Major U.S. Stock Indexes Fared Friday 6/30/2023.”
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Notes:
- Past performance is not a guarantee of future returns.
- Advice is provided by Vanguard Advisers, Inc. (VAI), a federally registered investment advisor. Eligibility restrictions may apply. VAI cannot guarantee a profit or prevent a loss.
- Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, in the U.S., which it awards to individuals who successfully complete the CFP Board's initial and ongoing certification requirements.