NEW YORK — Workers know they need
financial planning, and they are looking at their employers to guide them to sound decisions, according to a study from
Ameriprise Financial Inc. in Minneapolis.
More than 80% of employees said that they would use a
financial planning option if their employers covered a portion of the services as a part of a benefit package, according to the 2007 Ameriprise Workplace Financial Planning Benefit Decision Study.
With out-of-pocket expenses for life insurance and 401(k) plans continuing to increase, 46% of the workers said they would reduce saving and investing to cover the rising costs.
About 20% said they would contribute less to their 401(k)s. The trade-off points out a need for financial guidance to help workers manage their benefits.
“With the significant transition of more financial responsibility for benefits to employees and the increasing complexity of those decisions, both employees and employers are struggling,” Rusty Field, vice president of Ameriprise Workplace Financial Planning, wrote in an e-mail.
Companies are expressing interest in having a managed account inside a defined contribution plan and then enlisting the help of a third party to provide advisory services for workers, said Eric Levy, retirement business leader in outsourcing at Mercer HR Services in Norwood, Mass.
“Over the last three to six months, we’ve seen more interest from plan sponsors on what they are offering their participants,” he said.
Both employees and their companies are searching for upfront advice on what to do with their retirement nest eggs, as well as educational seminars at the worksite, Mr. Levy said.
“Providers such as Financial Engines Inc. [of Palo Alto, Calif.] deliver advice through call centers and the Internet, but adviser networks that are associated with corporate retirement plans may look at planning in a broader way,” he said.
There is demand for it, too, as the survey found that less than one out of five respondents had a professionally prepared financial plan.
Of course, that comes at a greater cost to plan sponsors, and there are numerous ways to outline fees for companies and third-party service providers.
“Over the last two years, the most common approaches we’ve seen involve focusing a subsidy on a particular level of employee and having tiers of subsidy which increase based on the level of the employee,” Mr. Field said.
However, according to Mr. Levy, the way a participating adviser gets paid can be murky: If the provider of a company’s defined contribution plan is also handling
financial planning, then the adviser is considered an extension of services.
On the other hand, third-party planners may end up scoring future business when participants realize they need additional services, he said.
Still, plan sponsors will want to watch out for product marketing pitches that are masquerading as on-site education seminars or comprehensive planning advice, Mr. Levy added.
“There is an onus on the employer to make sure they have people who are looking out for the employees and are willing to provide independent advice,” he said. “People need financial advice in general, but
is that service focused on the needs of the employee rather than what an adviser needs to sell at the moment?”
Still, as benefits providers are noting that employees demand their services, companies will have the opportunity to shop around for a variety of planning services at an affordable pricing level, Mr. Field noted.
“Employees make a huge investment in their benefits,” he said. “And if they’re not taking advantage of what the company makes available to them, then everyone loses.”
