Offering financial advice to employees is a modest but growing trend in the benefits world. Financial advice is seen as a way to alleviate the anxiety caused by the financial downturn, help people prepare for retirement and increase the wealth of employees without resorting to anything so vulgar and expensive as paying them more.
There are some grounds for caution, such as fear of liability if employees lose money based on tendered advice or the investment advisor benefits from the investment instruments he or she recommends. Also, you have to raise an eyebrow when you see the usual suspects lining up to offer financial advice in the wake of the economic crisis.
But all in all financial advice is a non-monetary benefit that merits serious consideration. People are struggling to make ends meet, figure out which tax legislation applies to their investments and plan for retirement. Several studies indicate that US workers are under-prepared for retirement and either worried about the future or mistakenly optimistic.
At the end of the day it’s in everyone’s interest to look out for the financial well-being of employees. You don’t want employees preoccupied with worry. Nor do you want people clinging to jobs past their ability to be productive. And you certainly don’t want to waste money offering retirement benefits that are poorly utilized.
You DO want to be known as a caring employer and you DO want employees to be thinking about work rather than mounting debt and looming retirement.
Assuming you are considering offering financial advice to employees, here are some tips:
- Find the right investment advisor – The law requires you to select someone who can demonstrate neutrality but you should also assess their qualifications by involving people with financial expertise in the selection process.
- Focus on tax impact – Making it easier for employees to optimize their investment mix while minimizing tax impact can translate into hard cash.
- Think globally, act locally – Get informed about different tax and liability laws in the countries you operate so you can offer appropriate financial training and benefits.
- Offer multiple options - Offering different options such as an online investment tool or one-on-ones with a reliable financial advisor will encourage more people to take advantage of the benefit.
- Make it easy – You can’t make people take charge of their finances but you can provide tools and resources to make it easier and make sure people know what’s available.
- Negotiate a group discount – Low-cost access to a trusted financial advisor and/or managed account service is a great benefit that can help nudge people out of their inertia when it comes to retirement planning.
- Basic training - Some people may need help with basic skills like budgeting before they can benefit from investment advice.
Now for the free financial advice courtesy of my grandfather, who raised three kids on a modest salary and saved enough to retire comfortably:
‘Never spend more than you earn. Don’t pay someone else’s mortgage. Invest in things people will always need, like utilities, and things that will always have value, like gold. Don’t sign anything until you read it.’
My corporate finance professor also offered the following advice: ‘You'll never beat the market. Stick to index funds.’
Take it or leave it.
Picture courtesy of bank.uni-hohenheim.de.
Laura Schroeder is a Compensation Strategist at Workday, headquartered in Pleasanton, CA. She has nearly fifteen years of experience designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University. Her articles and interviews on HCM topics have been published in the US, Europe and Asia. She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.