PLANADVISER - January/February 2022 - 2

publisher's note //
What's Good for Them
A
nxious armchair investors continue to search
for opportunities, despite the early 2022 market
turmoil. We may have moved on from the
" meme stocks " of last year, but whenever some investment
craze gets media attention-especially when
there are undercurrents of David vs. Goliath or " average
Joe strikes it rich " -you can be sure we'll see people
rushing to join in. The latest rage is " digital assets " such
as cryptocurrencies and non-fungible tokens (NFTs).
Recently, Capitalize, a fintech company that consolidates 401(k) accounts
into a new or existing employer-sponsored plan or individual retirement account
(IRA), surveyed 821 employees and 203 financial experts about cryptocurrencies.
Most (57%) of the employees surveyed by Capitalize view digital assets as
volatile investments, with 45% labeling them as risky. It seems however, that
volatility and riskiness don't matter to these employees, as 61% responded that
digital assets are a strong retirement investment option.
It was striking to see-despite the continual reminders from experts to ride
out market volatility, despite the fact that people notoriously buy high and sell
low because of emotional trading-how many of the survey's respondents still
thought digital assets are a good retirement or long-term investment option.
In fact, nearly three in five said they'd like to see digital asset options added to
their employer-provided retirement plans.
And-perhaps reinforcing the notion that people view these types of opportunities
overly optimistically-the survey found that respondents who invest
in digital assets in their retirement portfolios expect to retire eight to 13 years
earlier than those who don't!
But, of course, not all whims should be satisfied. Almost two-thirds of the
survey's adviser respondents wouldn't recommend retirement investors allocate
funds to a digital asset. The challenge for retirement plan advisers is to
help plan sponsors understand why they shouldn't give in to the squeaky-wheel
participants clamoring for access and put such options into their plan lineups.
Your clients will likely be asked about adding such investments to their
plan-or they, themselves, might be the ones asking. Digital assets might be
seen as an appropriate part of an overall portfolio-after all, a significant
percentage of the financial advisers in the survey expressed a growing confidence
in such options. Yet, that doesn't make them appropriate for a retirement
plan lineup-and that's the message that is sometimes hard to convey.
Volatility generally doesn't make for a good retirement plan vehicle, as
most investment policy statements (IPSs) would red flag using such unstable
investments. And, as far as performance over time-one of the most common
benchmarks for retirement plan investments-most digital assets don't fare
well here either; most are too new to have such a record. What's the benchmark
against which to measure these things anyway?
For some perspective, let's ponder the implications of putting these into the
plan. We don't know what will happen now in Hughes v. Northwestern University,
as the Supreme Court just sent it back to the lower court to reconsider.
But Northwestern's argument that there were so many options from which to
choose-200-that participants could make the right selections wasn't sufficient
to insulate the sponsor from participant claims. In the case of digital
assets, you could see a court saying that even making such options available-
even with limitations or guidance-isn't prudent or the right fiduciary choice.
We try to get sponsors to say " yes " -e.g., to adding better plan design features
and options for engagement-but this is one time you'll have to advise them to
say " no. " And that's in everyone's best interest. -Alison Cooke Mintzer, Publisher
publisher: Alison Cooke Mintzer
Alison.Mintzer@issmediasolutions.com
creative director: SooJin Buzelli
SooJin.Buzelli@issmediasolutions.com
managing editor: Judy Faust Hartnett
Judy.FaustHartnett@issmediasolutions.com
managing editor, planadviser.com:
John Manganaro
John.Manganaro@issmediasolutions.com
editorial staff: Rebecca Moore, DJ Shaw,
Michele Theodore, Karen Wittwer, Noah Zuss
contributors: Beth Braverman, Michael Katz,
Ed McCarthy, Judy Ward
surveys & research: Angela Marinakis, Jackie Scott
design & production: Donna Bien-Aimé, Alanna
Jacobs, Samantha Yu
design contributor: Cherese Rambaldi
art contributors: Tim Bower, Harry Campbell,
Karlotta Freier, Mar Hernández (cover), Claudi
Kessels, Jonathon Rosen, Daniel Shaffer,
Silver Orchid Photography, Simone Virgini
strategy & operations: Michelle Lamison
commercial director: Rob Reif
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PLANADVISER - January/February 2022

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