If 2008 and 2009 were largely about advisors reacting to deteriorating market conditions in order to minimize damage to client portfolios, then 2010 will be a year for advisors to shift back into proactive mode by helping clients put the past behind them--and their retirement plans back on track.
H. Brian Adcock is one advisor who welcomes such a shift. "I'm as busy as I can remember--in a good way," says Adcock, executive vice president at Adcock Financial Group in Tampa, Fla.
Client 401(k) plans are one reason his plate is full. Part of the job description for advisors such as Adcock is to help their 401(k)-participating clients not only recoup recent plan losses but to reposition plan assets for renewed growth while also insulating them from the next major market nosedive. Though the limited number of investment options offered within most plans can hamper an advisor's creativity in that regard, there are plenty of tools and tactics to optimize the performance of client 401(k) plans going forward.
Here are several that retirement planning experts say are worth considering for boomer clients with 401(k) holdings:
Access alternative assets classes
Diversification is the name of the game when it comes to mitigating major losses and volatility inside 401(k) plans, and so-called "alternative" investments represent a good way to diversify. The challenge is finding a plan that offers access to alternative asset classes such as real estate, commodities, inflation-protected bonds, global bonds and more, notes Chris Karam, managing director of Sheridan Road Financial in Northbrook, Ill.
Sheridan Road's role as both a wealth management firm for individuals and an advisor to retirement plans affords Karam a unique perspective on the options available to investors to diversify their 401(k) holdings. To gain access to alternative asset classes in a plan that doesn't provide a direct option for investing in them, he suggests looking at target-date, target-risk or lifecycle funds, some of whose models include alternative asset classes. "You're giving participants access to those asset classes through the model, but not the opportunity to time in and out of them on their own."
Move assets off the sidelines
Perhaps worst off in the aftermath of the financial downturn, says Jim O'Shaughnessy, Karam's colleague and managing partner at Sheridan Road Financial, are people who shifted most or all of their 401(k) money out of equity positions, into cash, when the market was freefalling in late 2008 and early 2009 and haven't since summoned the courage to reinvest in equities to participate in the market rebound. The smart move, obviously, is to get those assets back in play sooner rather than later, says Adcock. "Participants have to get re-engaged. They have to take ownership of their plans."
But how to convince a skittish investor to do so? Again, lifecycle, target-risk and target-date funds can provide the impetus. "I believe age-based and risk-based funds continue to have a vital purpose in a retirement plan, especially in bringing people off the sidelines who either aren't comfortable with or sophisticated enough to make [their own asset allocation] decisions," explains Adcock. "Those kinds of allocation funds give people a little more confidence that their assets are being actively managed and monitored."