by: Roxanne Fleszar
from:  401kWire
February 16, 2000

The Yiddish term kvetch is used to describe a constant and annoying complainer. We all know one or more such persons and may find it difficult to deal with them. Unfortunately, if you represent your firm's retirement plan, you may be called upon from time to time to respond to complaints from the "company kvetch".

Recently, our pension clients have experienced complaints about all but the best performing growth funds in their plan from the most verbal of their employees. The divergence between growth and value style funds has never been greater with the average large-cap growth fund returning 38.09% in 1999 and 30.14% annually for the past five years. Participants are questioning the validity of large-cap value, equity income, and small-cap value funds, which returned 11.23%, 6.33%, and 3.34% in 1999. The annualized five-year performance of all of these categories through the end of the year is considerably lower than that of large cap growth funds. So, the participant asks why should he not put all of his money in the growth style "winners"? And, is the investment committee for the plan prudent in offering those "poor performers"?

To head investment concerns off at the pass, and effectively reply to the participants, be sure that they understand the criteria used for investment selection for the plan such as manager tenure, investment philosophy and style, quartile performance and fee structure. Provide frequent performance reports that compare the net performance results of each fund for the recent quarter, one, three and five years against appropriate benchmarks. For example compare your balanced fund against the Morningstar Balanced Index, your large capitalization growth fund against the Standard & Poor's 500 Index , your international fund against the Morgan Stanley Europe, Australia Far East Index etc.

Contrary to what your disgruntled employee thinks, a fund may not be under performing its peers. The report shows how well each of the plan's investment options compare to an index of similar funds. Communicate to the participants that these reports act as report cards for the fund managers. When warranted, replace a fund manager and communicate your reasons to all participants.

Your education programs and materials should communicate information about styles of investment management, show the cycles of investment performance discuss volatility and the risk/reward trade off as well as asset allocation. Utilize all forms of communication-verbal, written and tactile to meet different learning modes.

Since the bottom line for most participants is investment performance, you may expect to receive an increased number of complaints during a downturn or correction in the market. Take advantage of the situation to drive home the point of long-term investing to disgruntled participants with information on dollar-cost averaging materials, retirement calculators. Point them to written materials and Web sites that validate your points.

Some participant concerns are valid, some not; some well thought out, others not. All require a response. In this role, the first and most important step you must take is to listen. An employee is trying to bring your attention to what they see is a problem with the plan; if one person verbalizes it, they may be representing a valid point that others are unable to articulate. Make note of repeated concerns by several employees as a strong clue to a problem with the plan. Your employees are the best way to measure to what extent the plan's design is meeting its objectives. The nature of the participants concerns measures the knowledge and even the value of the education tools provided to them.

Finally, remember the old cliché, "There's no such thing as a stupid question", and try to maintain your wits and sense of humor.