So often, employees walk out of meetings designed to teach them about
their retirement investment plans with blank stares. A representative from
the investment company makes a speech,
talks numbers and reviews plans, and the
take-away is nothing but confusion. It
seems education is a critical missing component of retirement planning.
“If you offer a retirement investment plan
for your employees and you are the trustee
and plan administrator, you have a fiduciary responsibility to educate all of your
employees on a regular basis,” says Carina
S. Diamond, managing director, SS&G
Wealth Management, Akron. “That doesn’t
mean you or your employees have to be
experts. But you have to at least offer some
information on the basics: how to select
investments, how to plan for retirement
and how the plan works.”
Smart Business spoke to Diamond about
what employees need to know about plans
and how to tell whether they are getting the
right information.
How does a business owner know if employees are getting the proper education?
There are red flags that indicate that
employees do not understand a retirement
investment program, or perhaps the plan is
being misrepresented. Look at employee
participation trends. Do you notice that
workers under the age of 30 are not participating? Or, is there a close-knit group of
employees who have opted out of the plan?
The first scenario could be a sign that your
employees think the plan is for ‘old people.’
You should focus your education on the
time value of money. In the latter situation,
keep an eye out for an employee who is
influencing his or her friends to not participate.A ringleader of a clan within a company may have spread an inaccurate, negative message about the plan: ‘It’s not worth
it,’ or ‘They’re taking your money.’
Obviously, these remarks are inaccurate
and inhibit other employees from participating.
Business owners should also absolutely
abstain from offering investment advice.
This is a job for a qualified professional.
The bottom line: Analyze participation
trends and determine any misconceptions
before designing an education program.
What are key messages to drive home when
educating employees?
A lot of the education should be centered
on encouraging employees to save more. I
really emphasize that retirement planning
should be a top financial priority for
employees. People tend to defer planning
for their retirement because they fund their
children’s college educations or their own
lifestyles. But there are no scholarships or
loans for retirement. I also talk about social
security, or social insecurity, as I call it. It
won’t look the way it does today, which
puts more responsibility on employees to
participate in — and employers to offer —
investment plans.
What topics should the registered financial
advisers cover in education sessions?
It’s not a bad idea to provide a Financial
Planning 101 session. The financial adviser
should cover basics like paying off debt,
planning for retirement, etc. Your plan
adviser should lead meetings that focus on
the retirement investment plan at least
once a year, explaining in simple terms
how the plan works. Which funds are
included? What was last year’s performance? How does the adviser decide which
funds to bump from the plan and replace?
There are many tools today designed to
help employees save more, but they aren’t
helpful unless people understand how they
work. For example, some investment companies have programs where, every year,
employees’ contribution to the plan
increases by a certain amount, say, a percentage point. So in 2006, an employee
saves 4 percent of his or her earnings. In
2007, an automated function bumps that
savings to 5 percent, and so on. Also, there
are Web site tools that employees must
learn to use. A meeting like this is a great
time for the adviser to provide a tutorial.
What are some signs that a financial adviser
isn’t really working for the company?
If you don’t notice that one or two funds
disappear off the list each year and are
replaced by new funds, I’m willing to bet
your financial adviser is not watching the
plan carefully. No fund stays strong all the
time. Monitoring investments and recommending changes to the business owner is
your financial adviser’s fiduciary responsibility. There should be at least an annual
formal review of funds where the adviser
determines how funds are performing relative to their benchmarks. The financial
adviser should look for changes in fund
managers and risk profiles and take action.
How often should a business owner ‘shop’
investment providers?
Every three to five years, make sure your
plan is still competitive and that the fees
make sense. Find out about discounts as
you move to higher levels. Technology in
this area is advancing so quickly that if you
don’t shop the marketplace every few
years, you and your employees may be
missing out on many new progressive tools
that are available.
Registered representative of and securities and advisory services offered through
Multi-Financial Securities Corporation,
Member NASD, SIPC, an ING company.
SS&G Wealth Management and SS&G
Financial Services are not affiliated with
Multi-Financial Securities Corporation
or ING.
CARINA S. DIAMOND, CFP, LTCP, MBA, is the managing
director of SS&G Wealth Management LLC in Akron, Ohio. Reach
her at (330 )598-2208 or [email protected].