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Home > Library > Stable Times > Volume 3, Issue 2  The quarterly publication of the Stable Value Investment Association Second Quarter 1999 • Volume 3 Issue 2 Where on the World Wide Web is Stable Value?By Nell Hennessy, Senior Vice President, ASA As employers and employees increasingly turn to the Internet for information about their 401(k) assets, they can hardly avoid advice on investing in stocks and they are hard pressed to find information on investing in stable value. Stable value providers need to correct this situation by providing Internet information and tools to educate participants about stable value investments and the role stable value can play in a balanced portfolio. Why is 401(k) information on the Internet? The answer is primarily because the major 401(k) vendors provide Internet access to individual 401(k) accounts and investment options. These sites also provide education for participants about how to invest, ranging from the basics ("what is a stock") to interactive calculators and asset allocation models. Employers and 401(k) vendors are using Internet-based communications to:
Investor Education Probably the most important opportunity is investor education. Employers have shifted investment responsibility to employees, in part to minimize potential fiduciary exposure for individual investment choices. However, to minimize employer liability, employers must provide enough information to their employees for employees to make informed investment choices. Employers don't want to be in the business of giving investment advice. At the same time, financial product vendors don't want to become ERISA fiduciaries as a result of the participant information they provide. Historically, employees have had very little risk tolerance, which has favored stable value funds. Even with education campaigns on investment risks and returns, and the stock market's continuing upward climb, participants need to be reminded about the risks inherent in both stock and bond funds. This is particularly true for those nearing retirement or others with specific near-term financial needs. Models Asset allocation models are an easy way to make this point. They allow participants to model what they think (or fear) will happen in the future. In most cases, human resource professionals have neither the time nor the training to go through these what-if scenarios with participants, and participants do not want to discuss some of the scenarios they want to model, such as the impact of a job change or potential disabilities. The Department of Labor has outlined a safe harbor for asset allocation models that permits their use if the model is based on generally accepted investments theories and historic returns of different asset classes. All assumptions must accompany the model. The model can even identify your specific stable value option if a statement is included about similar alternatives in the plan. Plugging In and Logging On Employers are looking for modules to plug into their Internet and Intranet sites. Employers and their employees need to begin to hear about stable value. Stable value funds need to increase their Internet visibility by providing easy access to this material. Ideas for Stable Value Products Interactive materials that are particularly popular and would be useful for stable value vendors to provide include: Questionnaires designed to identify risk tolerance and investment time horizons. Calculators or worksheets allowing participants to model anticipated retirement income needs, taking into account other assets and pension payments that will be available in retirement. Software that participants can download to model their retirement income needs off-line. Interactive materials can be used to estimate future retirement income needs and assess the impact of different asset allocations. For stable value vendors, a winning strategy would be to focus on interactive materials that assess risk tolerance and emphasize stable value's role in the fixed income portion of the participant's asset allocations at various times in their working and retirement lives. Generating Use Having created the Internet tools, stable value providers need to publicize them and make them accessible to employers and to participants on the Web. SVIA has some excellent information on its site (www.stablevalue.org). Link to that site if you want a quick and easy way to get an Internet presence. On the SVIA listing of industry links, give SVIA a link to a page on your site that deals specifically with stable value rather than the generic front page of your corporate site. SVIA's page comes up most often on the first page of a net search if a participant plugs in "stable value"; almost none of its members have pages that show up in that search. Establish different pages for employers (who must be convinced to include your fund in their plan) and for their participants (who must be educated about the role that stable value provides in their future retirement security once the fund is in the plan). Parting Words of Advice for Stable Value Funds The biggest mistake is to wait until your stable value site is "done." The beauty of the Internet is the ease with which it can be changed. Put something up, get feedback from your customers and other visitors. Put up new material that keeps people coming back. Jettison things that don't work. As long as you plan for change, even if you don't know exactly how you are going to change, your site can be a valuable marketing tool for your stable value products and a valuable customer service for employers and participants.
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