3 things to consider amid legislative uncertainty

October 23, 2017 by Sean Marus

Legislative changes may significantly impact retirement planning.

about the author:

Sean Marus

Product marketing specialist

With years of experience in product marketing and content generation in the financial services industry, Sean is committed to providing informative and impactful content to financial professionals and the clients they serve.

A recent article from the New York Times reports that a group of politicians are seeking to change how tax-advantaged retirement accounts operate in the United States. Early indications are that the proposed legislative changes seek to lower the contribution limit of 401(k) accounts from $18,500 to $2,400. This comes in conjunction with recent, persistent debate over the DOL fiduciary rule, the fiscal budget, healthcare, and other significant financial and economic items.

Significant legislative changes — like that of the potential 401(k) overhaul — will fundamentally alter the way that investors and their advisors approach retirement funding. In light of an uncertain legislative future, how will you work with your clients to ensure they stay on track for their goals?

Short-term panic and long-term outlook

Uncertainty is often an investor’s worst enemy. When the vote for Britain to secede from the EU (Brexit) was finalized, the FTSE 100 fell about 6 percent in the following days. The panicked sell-off was rooted in the uncertainty of how the move would impact trade and other political relations amongst European countries, and also how that would impact the rest of the world. It took only a few days, however, for the FTSE to rebound to pre-Brexit levels.

In the days surrounding Federal Open Market Committee (FOMC) meetings where the committee discusses target federal fund rates, it is not uncommon for the Dow Jones Industrial Average to fluctuate a few percentage points. However, temporary events like FOMC meetings rarely dictate investor behavior on a long-term scale. History has repeatedly shown that staying patient among the chaos is often the best course of action.

Action items in light of legislative uncertainty

Communicate with clients

The first order of business should be to reach out to your clients. This could mean sending personalized content relevant to each clients’ needs or more generalized content to your entire base. Open the line of communication. Encourage your clients to ask you questions about their financial future. Work with them to ensure that they feel confident with the current status and trajectory of their livelihood.

Stay the course

It should be encouraged for advisors — and their clients — to continue on as usual while the histrionics of speculators play out. Oftentimes, rumblings of legislative overhauls ultimately do not get turned into law, and the panic associated with the conjecture was essentially all for nothing. Though it may be difficult, blocking out the noise is the best course of action when headlines are dominated by rumors of legislative upheaval.

Take inventory of client progress toward goal

When key, uncontrollable elements of your clients’ financial future are in question, there is arguably no better time to revisit your clients’ progress toward their goals. How are your clients working toward achieving their goals? If they are on track, assure them that legislative changes will not completely derail their plan so as long as they continue to be financially responsible. If your clients are falling behind on their goals, work with them to better position their financial future and calm any fears or apprehensions they may have.

To learn more about how Advicent can help you work toward achieving your clients’ goals, click here.