By Randy Myers
Like many others, the stable value industry has been impacted by the COVID-19 pandemic and its economic fallout. But the negative impacts, relative to what some other industries have suffered, have mostly been negligible, and in some cases offset by a few positive ones.
Most people working in the industry, like millions of other Americans, have been doing it from home since March of this year as the country has tried to minimize the spread of COVID-19. That will likely continue for a while—indefinitely in some cases, perhaps—and there’s not been a lot of pushback against that idea so far.
“We’ve gone to an all-virtual environment, and one of the most interesting things to me is that we’ve been fine with it,” said Jim Bucella, president of ADP Strategic Plan Services, during a virtual panel discussion at the 2020 SVIA Fall Forum moderated by Aruna Hobbs, head of institutional investments in the institutional solutions group at MassMutual. Bucella noted that even fund managers he’s talked with have found it somewhat easier to meet with and perform due diligence on the companies in which they invest because their contacts are not on the road and hence have more time to talk.
“I think a lot of our (plan sponsor) clients are going to stay virtual,” said Stephen Popper, managing director at Sageview Advisory Group, a registered investment advisory firm. He said working virtually has made it easier for plans to convene meetings of their fiduciary committees and has consumed less of each committee member’s time. It’s also opened opportunities for people to connect in ways they probably wouldn’t have considered in the past. He had a good conversation with a business contact one morning while both took their dogs for walks, for example. And one of his colleagues and a wholesaler teamed up to take a virtual bike ride using their Pelotons, then chatted virtually afterward.
Michael Leonberger, a stable value portfolio manager with Invesco Fixed Income, said working virtually has made his team accessible to clients in ways it hadn’t been in the past, when more people were traveling more often for business. “We’ve had a lot more catch-ups with clients on quarterly basis,” he said. “Clients are a lot more open to giving you 30 minutes on Zoom than spending four hours with you when you come to their office.”
Still, many executives in the stable value industry say they’re looking forward to traveling for business in person once the pandemic is under control, particularly when they’re trying to land new clients.
“You just can’t replace the value of sitting across the table from somebody in their office, seeing their operations and how they do business, and looking them in the eye,” Popper said.
For all the damage and heartache the pandemic has caused, it has, ironically, given some stable value businesses a boost. As retirement plan investors watched the economy contract and the stock market stumble in the spring, for example, some poured money into stable value funds as a potential safe haven from financial market volatility. Driven largely by participant-driven flows like that, Leonberger said, his firm’s stable value assets grew a bit over 10% in the first eight months of the year. Bucella, meanwhile, said his company’s investment management business as a 3(38) fiduciary was up about 30% in the fiscal year ended June 30. After a busy first quarter at Sageview, Popper said, potential new client business slowed for a while, but he said he has seen signs over the past six weeks that is changing.
Looking ahead to how the retirement landscape and the stable value industry might evolve over the next decade, Bucella and Leonberger said they were optimistic that the innovative spirit that marked the past several months will carry on as people continue to look for new ways to connect and to meet the needs of plan sponsors and plan participants. Stable value could play an expanded role, they suggested, in helping participants cope with market volatility and in the development of lifetime income solutions for retirees.
Popper said he’s excited about the potential for small employers to come together to form multiple employer retirement plans, which will become easier to do this year under provisions of the SECURE Act of 2019, and could make retirement plans available to more American workers.
Leonberger also anticipates that the retirement industry will continue its current push to bring financial wellness programs to American workers.
In terms of what business issues keep them up at night, Popper and Bucella both cited human capital concerns—in Popper’s case making sure team members get the support they need, and in Bucella’s keeping team members engaged and reducing turnover. Leonberger said he’s also concerned about the low yield environment and its impact on fixed-income markets and investors.
All agreed, though, that the future should be bright. Bucella noted that the Dow Jones Industrial Average stood at about 2,000 when he got into the investment business and that financial markets have endured numerous crises since then. Nonetheless, the ultimate trend has always been upward. (The Dow stood above 28,000 on the October 14th date of his panel discussion).
“As dark as it ever looks, it always gets better, and we always find a way to help people and to grow our businesses,” Bucella said. “There’s just no reason to get down.”