How to Talk to Your Advisor about Financial Wellness
New Year’s resolutions made in January can become a mere memory in February. Financial fitness is one resolution that employers can help employees “keep”. It’s an important goal as we continue to grapple with COVID-19. A great partner to help you help your employees is the company 401(k) plan and a knowledgeable plan advisor.
It makes good business sense to help employees achieve financial fitness. Financially healthy employees are more productive. Estimates of the number of employees who worry over finances has varied over the years. In the midst of COVID-19, Price Waterhouse Coopers’ 2020 annual Financial Wellness Study found this to be at an all-time high with 58 percent of respondents admitting to being financially stressed, and half of those noting that stress caused them to be distracted at work.
How can employers get started to encourage progress toward greater financial fitness? Here are some suggestions to guide you in a discussion with the advisor of your company’s 401(k) plan.
Broad Financial Education – Your employees likely are at different life stages, including recent graduates, young families, and those nearing retirement. Talk to your advisor about the kinds of topics that will help your workforce:
- Basic financial courses can provide guidance on budgeting or setting up an emergency fund as well as information on various types of insurance and when to purchase it.
- Young families will benefit from information about purchasing a home and saving for their children’s future college tuition.
- Basic retirement planning guidance as well as information on Social Security, Long-Term Care insurance and estate planning can help all employees plan for their future.
Methods of Delivery – Ask your 401(k) advisor to provide regular financial information or recommend a way for you to obtain it. Today advisors offer financial webinars virtually, which are often recorded for later viewing. Considering the broad range of financial topics available, it makes sense to provide information to employees monthly. And, depending upon the size of your workforce, your advisor may be willing to hold on-site meetings annually or bi-annually once face-to-face meetings are held more regularly.
Financial Wellness Tools – Your advisor can help you explore the financial education available from 401(k) recordkeepers. It can be as simple as articles or videos on broad financial topics that are available on participants’ websites. Some recordkeepers offer more comprehensive financial programs. Such programs can include an introductory survey that measures an individual’s wellness and then presents articles, recordings or podcasts to help the participant improve financial fitness. Follow-up surveys measure progress.
Saving for the Future – The confidence that accompanies growing financial fitness makes it easier for employees to save for the future. Enrollment meetings led by your advisor should encourage savings, explaining the way investment earnings compound over time to assist participants successfully build towards retirement. Recordkeepers with readiness tools can assist, measuring whether participants are on-track to reach their retirement goals based on such known information as age, salary, savings rates, investment selections and account balances. These tools also encourage savings by showing the result of greater 401(k) contributions.
Investment Guidance – Once employees are saving, investing properly is an important part of being financially fit. Consider the investments and the investment guidance you offer in your company’s 401(k) plan. Is it easy for participants to be properly diversified? Is your advisor available to speak with employees? The gold standard is to offer your employees professional investment management. Some advisors will construct and manage model portfolios for your plan, then help individual participants select the model that is a best fit.
Your Role – Beginning a conversation with your 401(k) advisor about financial wellness is an important first step to help your employees become financially fit. Once you have identified the educational opportunities you’ll offer, it’s important to encourage your employees to take advantage of these resources. Enlist others in the organization. Motivating employees to take advantage of financial education can be a part of executive management’s regular communications. Informing mid-level managers of the financial education, programs and services available through the 401(k) plan can help them stimulate greater participation among their teams. You may also want to consider developing an incentive program to encourage participation among all employees.
Employers and employees alike have hope for 2021, as COVID-19 vaccines become available and we return to the world of work. Helping employees improve their financial fitness and build toward a secure retirement future will benefit organizations and individuals today and in years to come.
This blog is written to help makes the lives of plan sponsors easier in the process of meeting legal under ERISA and improving their defined contribution plans. Please understand that reading this blog should not alone take the place of a one-on-one consultation regarding the needs of your specific plan and hence cannot be a guarantee against fiduciary brief.