There has been an encouraging trend among plan sponsors to implement financial management programs with the goal to help participants become more financially secure and confident. The logic is simple: A population that is fiscally healthy may be less distracted, stressed and more productive in their work.
Sounds like a rare win-win scenario. However, there is an often-underserved demographic in these programs. People of low income or modest means are often beyond the scope of these financial programs put on by well-meaning employers, which typically focus on long-term planning topics such as college planning or building a retirement nest egg.
Indeed, much of the financial planning industry focuses on these long-term ideas, whereas the low-income demographics’ needs may be more immediate, such as budgeting monthly expenses, paying down debt, or saving an emergency fund.
This group has been dismissed by the financial planning industry in assuming their retirement needs should be adequately served by the Social Security Administration. The group that may need the advice and counsel of a prudent financial adviser the most is the same group that more than likely finds that advice inaccessible. I propose a different way.
Financial management programs need to evolve. The first step is to reject the cookie-cutter program in favor of the tailored plan that is relevant to the participants of an organization. Effective financial planning understands participant needs. Understanding participant needs means having the courage to directly ask what financial topics are the most pressing and developing education and engagement to address those needs. Consider using surveys or focus groups where appropriate.
Building baby steps
An engagement plan, based on participant feedback and interest, can be devised to deliver the education and message that is most beneficial to a population. The method of delivering the message is also important. For example, if the population isn’t computer savvy, opt for flyers or in-person meetings instead. The key is to engage participants on their turf and make it easy for them.
Ultimately, the objective of any program is to empower the participant to take charge of their own retirement and financial picture. As with any initiative, there should be buy-in from the key stakeholders, which includes the influential leaders on the team who are not management. Success metrics need to be adjusted to understand an organization’s return on investment, which can’t be measured by traditional ways, such as higher plan contributions or participation. Advisers and organizations need patience in building baby steps to financial health.
It is striking that the retirement plan for many people relies on Social Security, and that so many of our neighbors and friends struggle. Financial management programs cannot and should not forget about this group. These programs should evolve to be a relevant, useful tool to help all participants pursue their financial goals — even if that does not translate into immediate retirement savings, but instead builds the foundation for retirement saving. We as advisers can and should be skilled in effecting change in the groups that we advise. Listen, engage and empower participants.
This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does adviser assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
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