Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
business builder employee benefits
by Laurie Laner
Meteorically rising health-care costs have gotten employers’ full attention. But while employers focus on health care, employees fret about whether they’ve stockpiled enough for the retirement lifestyle they’re dreaming of.
Employees are indeed stressing about shouldering the responsibility for their retirement as funding has shifted from the government and employer to individual employees. Ready or not, individuals are increasingly being put in the driver’s seat to create their own financial futures.
For the past 10 years, Deloitte Consulting has surveyed employees about benefit issues. Since 1995, employers have shifted their No. 1 employee benefits concern from providing investment/financial education to controlling health costs. Employees, however, have clearly stated that their No. 1 concern is to evaluate the adequacy of their current level of retirement savings (66% of respondents).
And the No. 2 concern is to evaluate their current investment options. Health-care costs are ranked in the top 5, but didn’t receive as many votes as retirement and investment issues.
Employees have many good reasons to rank retirement planning concerns above health care benefits or costs:
• For many, retirement age is not far off. Current boomer demographics make this true for more employees than ever.
• Social Security is under pressure, and no one knows for sure what the funding potential is long-term.
• Market losses sustained at the beginning of the decade are still in “recovery mode.” Many employees still feel bleak about long-term investment results.
• Health-care costs are rising and will consume an ever-increasing share of disposable income, especially as the aging of the population puts more demand on our health-care system.
• Lifestyle expectations of pre-retirees have increased tremendously due to greater affluence and the ability to stay active longer.
• Finally and most importantly, greater financial and personal responsibility have been placed on employees’ shoulders.
Bottom line: Financial stress is eating away at your employees’ time, energy and productivity. They know it, but not all employers realize the extent of it. This has made financial/investment education a popular perk, both because employees most want it, and because the cost per employee is modest.
Doing the math
A financial seminar doesn’t have to be costly. Costs vary, but let’s assume you have 50 employees and you provide a five-hour financial planning workshop over a series of lunch hours. Let’s assume each session costs $700, including presentation materials, plus perhaps a $700 set-up fee for the educational consultant to become familiar with your benefits and company. That’s $700 per workshop, times five workshops, plus $700 for the one-time set-up fee, for $4,200.
To leverage this expenditure, you could invite spouses to a retirement and estate planning program for two evenings with a light dinner. For just about the same cost, you generate even more goodwill. And, when financial planning becomes a family affair, the chances of people following through (and reducing stress) increase.
Some options for providing financial education services are listed below:
Traditional financial planners. The cost for a financial planner to educate your employees could be from $0 (with the adviser hoping to be compensated with fees or commissions from attracting your employees as clients) to a flat fee to a cost per employee. Today, most employers would prefer to pay a fee and not have a planner pursuing their employees after the presentation.
Working with a certified financial planner (CFP) is a sound idea because you are at least assured that this person has had some formal education and possesses enough peripheral vision to cover all the financial planning bases.
Financial planning software. Much of the planning software for employers focuses only on retirement plans, although vendors are slowly integrating other areas of personal finance into their programs. Vanguard, T. Rowe Price, and Quicken have some good programs. Keep in mind, however, that employees may need guidance in learning how to use the software to their advantage. The real answers lie in the research, explanation and parameters that are set in working with the spreadsheet, not the software.
Nonetheless, if all you want is to provide modeling software for employees to calculate everything from the impact of a 401(k) contribution to how much a retirement nest egg will need to be, these programs can be useful.
Web-based solutions. Several companies have formed alliances to develop either stand-alone or Web-based software programs for employee education. Some of the names of these products are mPower, Morningstar ClearFuture, and Financial Engine’s Investment Advisor. Pricing varies quite widely among these products.
Individual consultation. This option works better in smaller companies than in larger corporations, although large companies often provide this for higher-level executives. You can provide a certain level of reimbursement for employees who choose to use their own financial adviser. This system creates some paperwork to verify expenses, but it gives an employee more discretion in choosing someone with whom he or she is comfortable.
Whatever method you choose, give some thought to financial education. If you want to motivate employees, increase appreciation of your employee benefits and generate goodwill, cutting health costs will help. But providing a stellar program on personal financial planning would line up more with what your employees truly want and need.
[contact] Laurie Laner, CFP, is president of Financial Designs Inc., a financial planning firm in St. Louis Park : 952.843.0300; la****@********ne.com; www.fdi-online.com
