5 minute read
HUMAN RESOURCES
As employers, we tout our employee benefits package as a key component to attracting talent. In a tight labor market, many have enriched their offerings, seeking an edge in the war for talent. The overall cost to an organization is significant in dollars and time to administer. Often overlooked in the process of designing and delivering the benefit package is the employee’s ability to understand and properly utilize these powerful resources. Even if the benefit comes with a user’s manual, it is left up to the individual employee to figure out how each benefit offering fits into their household financial situation. Unfortunately, evidence suggests the typical American worker is not equipped to effectively use these generous tools.
Your employees’ financial stress is mounting
Search online for “financial stress in America,” and you will find overwhelming support for the assertion that the overall financial well-being of the American population is downright scary. How can it be that the most affluent country on this planet is burdened with this malady? As financial professionals, you’ve endured countless hours of formal classroom training, hands-on experience and continuing professional development activities. The typical American — your workforce, to be specific — has been asked to manage your employee benefit offering, their personal retirement planning and the everyday task of balancing the household budget with little to no training. One of the biggest failures in the American educational system is not requiring personal financial management in the school curriculum. It should come as no surprise that 65% of Americans surveyed by the American Psychological Association1 say money is a significant source of stress; in fact, it is the highest stress level reported since 2015. Employers, it is your time to step up!
Employment benefits don’t come with instructions
Why would the employer want to take on this responsibility when our educational system can’t figure it out? Simply said, because it’s good business. With reported return on investment (ROI) up to $3 for every $1 spent on wellness
By Joseph Topp, CPA
and the creation of community within your organization, training employees in personal financial management makes sense. Practically speaking, your organization invests a great deal of money and resources to provide your employees with a generous suite of employment benefits. These benefit programs are complicated, prone to misuse and mismanagement in the hands of those who lack the appropriate financial acumen. While you wouldn’t put a new machine into production without properly setting up and training your workforce, why would you deliver the employee benefit package without proper setup instructions, ongoing training and user supervision? Historically, employers have relied on the respective benefit vendor to
communicate and educate their employees on the selection and use of the particular benefit. This decision is attractive because it comes at little or no cost to the employer. But this approach has two primary flaws that merit deliberation. These are explained in the next section.
Employees need integrative financial advice
Your respective benefit providers typically have in-depth knowledge of their respective products and services but often lack the expertise to educate and advise your employees on how the product integrates with your other benefit offerings. As an example, the optimal use of a Health Savings Account (HSA) would be to accumulate the annual contributions and invest the account for use in retirement. While this strategy provides meaningful tax benefits, it creates another pool of assets requiring ongoing investment management. An investment strategy for these assets should be made only after considering the household’s retirement savings position and investment strategy. Typically, neither your HSA provider nor your insurance benefits broker are willing to provide an employee advice that encompasses both investment accounts. A better solution would be an advisor with knowledge and expertise across the multiple disciplines impacted, such as tax planning, retiree medical expenses and investment management. The other important consideration when evaluating your financial wellness provider is to understand if there are potential conflicts of interest. The reality is that financial wellness offerings are often developed by providers as a chance to prospect the employee population for opportunities to develop retail relationships or promote additional product sales. The consequence of this is that the employees who need the most help are often the ones who are not attractive prospects for wealth management or other financial products. Therefore, they receive little if any attention when they need it most. Your best bet is to align with a financial wellness provider that does not sell financial products or services. To help you identify the true educators from the prospectors, ask them to agree in writing to serve as an ERISA fiduciary for the participant services they are providing.
Conclusion
Progressive organizations are expanding their wellness programs to include a financial component as a primary pillar. They understand the complexity of the suite of employment benefits they offer and genuinely seek to assist their employees in making prudent financial decisions. Additionally, when identifying a provider with the expertise to advise across the breadth of financial issues, they consider the potential conflicts of interest that may impair the quality of advice rendered. While quantifying the ROI is difficult, a quality financial coaching benefit can have a dramatic impact on the employee population and contribute to the sense of community employers are trying to build.
Joseph Topp is a principal and vice president – investment consulting services at Francis Investment Counsel LLC in Brookfield. Contact him at 262-781-8950 or joseph.topp@francisinvco.com.
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