Chad Parks didn't know he would become a retirement guru. But when he chose to focus on personal, as opposed to corporate, finance during his Master's education at Golden Gate University, the "seed was planted." He got licensed in financial planning during his tenure as a retail stockbroker and began working with small-business owners in his investment advisory practice. That's when the light bulb went off - he was always recommending that each small business get a retirement plan in place to coincide with their employee benefits. He didn't see any products that met his clients' needs, and he says, "One thing led to another, and I started The Online 401(k)."
So, at the age of 28, Parks was an entrepreneur and chief executive officer in the 1999 tech startup boom. He hasn't looked back since. His goal: to provide the approximately 40 million people who work at small businesses with an opportunity at a retirement savings account through their employer. He says the 2010 U.S. Census showed that 92% of businesses between two and 20 employees (with 4 million businesses this size, that's where the 40 million people estimation comes from) don't have 401(k)s in place for employees. His passion for teaching employers and employees about retirement has only grown over the years. And that's why he set out last summer, along with fellow The Online 401(k) employee Andrew Meadows and a group of filmmakers, to hear about the retirement crisis in America and document it first hand. The final documentary, called "Broken Eggs," is set for release soon.
MORE THAN BUSINESS
"We're looking at a major concern about retirement," Parks says. "This film it is not a commercial for The Online 401(k): It's about asking the question: 'How did we get here?'" He says he's less concerned with the film impacting his business than he is with impacting the 29% of Americans who aren't saving for retirement at all.
Parks and Meadows piled into an RV during this seven-week trip last summer and now have a story exploring the retirement plans of three main characters: a boomer couple, a Gen X-er and a millennial. Meadows, who conducted many of the interviews in the film, is enthused about the potential impact. "The three-legged stool is out the door," he says. "There are no pensions, Social Security won't be left and it leaves you with a very unfortunate one option of personal savings."
OUTSIDE THE BOX
But a movie isn't the only way that Parks and team are trying to tackle financial education in America.
"I always say that it's a shame that I had to get a master's to understand the basics of personal finance," Parks says. He acknowledges, like many in the industry, that financial education is still lacking from schools - and that's where Meadows comes in to the equation. Known more specifically in some circles, like Twitter, as the coolest 401(k) guy, Meadows' official title at The Online 401(k) is consumer and brand ambassador. His job: reinvent financial literacy. And he took a different path to the finance world than most. He majored in broadcast journalism but entered the 401(k) industry years ago as a call-center representative. He was tapped by Parks who saw a special enthusiasm about how to redirect the American dialogue about retirement.
"My goal in life is to take the fear out of 401(k)," Meadows says. "I'd love for there to be some sort of way to measure, like a credit score, how people are doing with their savings. There used to be shame in credit scores and now there's songs and jingles, and I'd love a retirement score to gamify savings." Gamify - the act of turning education, shopping, really anything, into a game - this is a word that both Meadows and Parks emphasize as an important next step for the company's financial education programs for employers and employees.
"Gamify anything and people will learn about it and talk about it," Meadows says. "It gets people to share it, too." Parks agrees and laughs saying, "People will spend real money on fake things in games."
Meadows' other responsibilities in his position solely dedicated to education include blogging, Face-booking, tweeting from his own Twitter brand, as well as the company's, and managing LinkedIn. "It looks like one third of the people engaged on LinkedIn are senior-level employees," he explains. "So that's a really important medium to educate employers and employees."
His more outside-of-the-box jobs include creating memes, like their financial advice dog intended to make people laugh and then think about their own financial situation and change it, developing quizzes for people to determine what sort of investor and/or saver they are and appearing as a guest expert on various mediums like Reddit. And he's dreaming up more ideas every day. The best part about his job? "Everything that we do is available to access by everyone," he says. "I would say our clients specifically check it out more … our higher goal and mission statement as a company is to help every small business."
THE STATUS OF FINANCIAL LITERACY
The exact measure of financial literacy rates vary state by state because of different education programs and rules for measurement. But industry research group LIMRA looked at 2,000 Americans this April and asked them a series of questions about basic financial and retirement topics - only one in eight Americans could correctly answer most of the questions. Thirty-six percent of respondents failed the quiz, "answering no more than half of the questions correctly," according to LIMRA. The questions included calculating interest accrued in a savings account for a certain number of years, the difference between a single stock and a stock mutual fund, what a Roth IRA means for tax purposes and details about 401(k) contribution limitations. LIMRA says only 27% of Americans responding have a "high level" of financial knowledge based on the results.
So what can be done to improve this, especially in the retirement sector where Parks says so many Americans may be "doomed?"
To go back to the basics a bit, Nick Hammelman, director of employer and participant services at Northwestern Mutual in Reston, Va., breaks it down. "Financial planning is a broad concept, and it's important to recognize that there are three categories: risk management, wealth accumulation, and wealth preservation and distribution," he says.
Those factors aren't changing, so what Americans need to know isn't really going to change either, but the approach does. Hammelman says the fast pace of life and bombardment of information for adults places a challenge on the average American to learn about their financial and retirement planning options.
"I don't think we arm kids well enough at elementary school about how finances work, and I don't think we educate our kids in the financial vein about the risks," he continues. "There's the need to plan and the need to save. If you're going to have an opportunity to see change it needs to start rudimentary in elementary school, so when you're launched into the real world there's a context that exists. It's often delivered in silos."
IN THE WORKPLACE
Gerald Wernette is the principal and director of Rehmann Retirement Builders in Farmington Hills, Mich., and says he's trying a different approach when talking with employees about their retirement options. "Instead of, with a 401(k) for example, telling them what's a stock and what's a bond, we're focusing now on starting with the end in mind," he says. "I tell them, 'You want to retire someday. Let's talk about what that's going to look like.'"
He talks about how retirement will work, that they'll need income and what it's going to take to start it. "We're working everyone backwards and at the end of the day it's been producing more successful results in garnishing interest," he adds.
Wernette says the best example of success is within his own company, "as diverse an organization as any other." The company started taking the "backward" approach in addition to introducing a new interactive tool that includes a virtual person walking everyone through the financial planning information. "We had an 88% usage rate, and out of those people we had 82% make what we felt was a good decision in electing to be in the plan and increasing their current contribution rate, along with making what I would call a good investment decision in electing to utilize one of the core investment options that were built around asset allocation models," he explains. He adds that the key with approaching employees anywhere is taking a new approach, talking on their level and giving them the big picture. This will create what he calls a "meaningful impact."
The Online 401(k)'s Parks couldn't agree more that jargon needs to be eliminated. "We in the industry tend to overcomplicate things," he says. "People are paying for service they don't understand. If you go to the grocery store or buy a car, you don't sit back and not ask questions about price." In this business, he says advisers need to remember to be a layperson right along with their clients.
THE FUTURE
Parks "doesn't want to be a doomsdayer," but with the 30 million baby boomers retiring, he's very concerned about "what will happen to money and the economy."
He says that while people like himself, Meadows and thousands of other financial planners are doing their part to educate the American public, they can't do it alone. "It's a high-risk situation," he says. "I think the government is going to need to create mandates and incentives for businesses and individuals to save."
But until then, Meadows is fine trying to touch a new person about retirement one day at a time. "No one likes talking about 401(k)s more than I do," he says.
