Making the Case for Unbiased Education
By Liz Davidson, founder and CEO of Financial Finesse.
Employers are recognizing the need for in-depth retirement education to help employees get back on track for retirement. Due to current economic conditions, employees are delaying retirement. According to a study by Pew Research Center in September 2009, nearly four in ten adults working past the age of 62 are saying they delayed retirement because of the recession and workers in their 50's reported they plan on pushing back their expected retirement date.
Loans and hardship withdrawals are also increasing according to a study by Fidelity Investments. They found that the average age of those taking a loan or hardship withdrawal is between 35 and 55 years old - "a worker's peak earning years - when individuals often have to deal with multiple, competing, financial challenges." Companies are interested in financial education programs to address those challenges. CFOs, however, are not convinced they should pay a financial education provider to deliver education when the fee they are already paying includes regular retirement workshops and on-site 1x1 consultations. Is there a case that unbiased education is worth paying for?
There are three ways to address this:
1. See if the retirement plan provider will subsidize the education from an independent provider. While the education may seem "free" because it's included in the cost, in reality your retirement plan provider has allocated a portion of the fees you pay towards the education. Depending on the size of your company, you may be able to convince your provider to lower their fees in exchange for not doing the workshops and 1x1s.
If you are considering a financial education firm that has a proven track record for increasing retirement plan participation and deferral rates, your retirement plan provider may be more likely to consider this option. From their point of view, if an independent firm is able to get better results in terms of getting employees to save more for retirement, then they win on two counts: 1) the more money your employees defer into your plan, the more revenue the plan generates for the provider, and 2) if your company is happy with participation and deferral rates, you are less likely to change retirement plan providers.
2. Retirement education can typically be charged to the plan, meaning that it comes automatically out of the fees participants pay. For a large company, the cost per participant is miniscule with most independent education providers and benefits almost always outweigh costs, since most employees improve their asset allocation and make better investment decisions after receiving the education. **Important caveat: Before you implement this option, consult your legal counsel or ERISA attorney as you have a fiduciary responsibility to make sure costs are reasonable for services rendered. Also, the general consensus among ERISA attorneys is that only retirement education programs can be charged to the plan. Education on other financial topics should come from your HR budget.
3. If you are unable to arrange for either #1 or #2 above, find out what metrics your CFO would need to see in order to be convinced the investment is worth it and see if he/she would be open to launching a pilot program and measuring the ROI based on pre-set metrics.
About Financial Finesse: Financial Finesse was founded with a single mission: Provide people with the information they need to become financially independent and secure. Today, we are the leading provider of unbiased financial education for large companies and municipalities. Our financial education services are fully integrated programs designed to address the strategic goals of the organizations we service and are delivered by on-staff Certified Financial Planner™ professionals as an employee benefit. If you are interested in learning more about workplace financial education programs, contact one of our education consultants at AskFF@financialfinesse.com.
The Ask Financial Finesse Q&A service is designed to provide general information on trends and developments in workplace financial education programs and participant education strategies. Due to the complex nature of financial benefits and/or workplace financial issues, the information contained in this document is not to be construed as advice.
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