Financial Wellness Financial Planning as an Employee Benefit

Transcription

1 Financial Wellness Financial Planning as an Employee Benefit Richard Ellington, CEBS Financial Planner Trilogy Financial Services Danvers, Massachusetts The opinions expressed in this presentation are those of the speaker. The International Society and International Foundation disclaims responsibility for views expressed and statements made by the program speakers. 5B-1

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3 Do Americans Need Financial Help? Three out of every four Americans say they aren't saving enough. (2008 Pew Research Center) Eighty five percent of college graduates plan to move back home after graduating. (Twentysomething Inc survey) The rate has risen from sixty seven percent in 06. (Jessica Dickler, CNN staff writer) Forty percent will never gain a net worth in excess of ten thousand dollars. (American Dream Education Campaign) 5B-3

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5 Why Offer Financial Education? Just look at the statistics Think about people you know Where else are employees going to get it? Information Overload Google it! Employees need it, want it and appreciate it. Less financial stress and increased financial confidence can lead to healthier, happier and more productive employees. 5B-5

6 Keys To Success Must be continuous. Practice makes perfect. If you don t use it you lose it. Out of sight out of mind. Must be fun, engaging, timely and varied. Should be a combination of delivery styles, ex. self study, group sessions and 1 on 1. Should apply to employees with different levels of investment expertise. Have measureable results. 5B-6

7 Why Financial Education Is Not Offered? 5B-7

8 Three Takeaways 1. Different ways to offer financial planning as an employee benefit. 2. Red flags when considering offering financial planning as an employee benefit. 3. List of questions to ask when selecting a financial advisor/facilitator. 5B-8

9 Statistics Break Only fifty nine percent of the young adults in Generation Y (ages eighteen to twenty nine) pay their bills on time every month. (2008 Financial Literacy Survey National Foundation for Credit Counseling, Inc. and MSN Money) Almost fifty percent of those who closely monitor their finances say that they learned about personal finance from their parents or at home more frequently. (2008 Financial Literacy Survey National Foundation for Credit Counseling, Inc. and MSN Money) 5B-9

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11 Financial Education Approaches Street Smart vs Book Smart Changing Behavior vs Teaching Fiduciary vs Suitability Process vs performance Smart Spending Strategies vs Budgeting Captive Advisers vs Independent Advisers 5B-11

12 Street Smart vs Book Smart Street Smart advisors educate on how things work in the real world. Street smart can prepare/help employees when they work with advisors. Street smart education helps employees select the right advisor. Book smart is more definition focused. Both can educate participants on the costs of investing and how little things can make a big difference. 5B-12

13 Street Smart Examples How advisors can be paid differently from the same investment. How the same investment can have different expenses depending on how it is purchased. How you may be able to reduce fees when transferring accounts. 5B-13

14 Example What is the total cost of a mutual fund? Expense ratios do not always show total costs. Advisors need to be paid. Money managers need to be paid. Trading costs need to be paid. Third party administrators may need to be paid. Answer It depends. Street Smart Financial Education can help. 5B-14

15 Fiduciary vs Suitability Suitability has a lower standard of care. Recommendations just need to be suitable, even though there might be a better option. A person working as a fiduciary will put your employees needs first and find the best solution for them. Advisors may or may not be able to work as a fiduciary depending on what licenses they hold and who they work for. 5B-15

16 Teaching vs Changing Behavior Teaching typically focuses on definitions, ex. asset allocation, risk tolerance and what mutual funds and bonds are. Education focusing on changing behavior is more goals based and helps people make changes to improve their financial position. If you give a man a fish he will have dinner. If you teach a man to fish, he will eat every night. 5B-16

17 Process vs Performance Performance education is typically more short term thinking. Little attention on the process. Process education focuses on how investments are managed and the long term steps to success. Little focus on performance. Education on process can help people get through good and bad times of the market. 5B-17

18 Budgeting vs Smart Spending Budgeting few people like to do them. People think of it as a task that makes you count every penny and not making shopping fun. Smart spending is budgeting with a fun twist. Smart spending often lets you get what you want, but hopefully at the lower cost. 5B-18

19 Smart Spending Examples How to purchase items at a lower cost: Groceries Pharmacy Rewards Card Coupon Clubs Please share your strategies Start a fun fund. Buy and sell things you like. 5B-19

20 Captive vs Independent Captive advisors may be limited to the products and services that they can offer or talk about. Captive advisors may have proprietary products that only they can sell and service. Independent advisors typically do not have any of their own products. Independent advisors typically have a large platform of products and services to choose from. 5B-20

21 Statistics Break Two in five U.S. adults gave themselves a C, D, or F on their knowledge of personal finance. 56% admit that they do not have a budget. One third, or more than 77 million Americans, do not pay all of their bills on time. 39% carry credit card debt over from month to month. The sixth annual Financial Literacy Survey of adults, conducted in 2012 on behalf of the National Foundation for Credit Counseling and the Network Branded Prepaid Card Association 5B-21

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23 Common Financial Educators Licensed Advisors Non Licensed Financial Educators Educators connected with the retirement plan or other employee benefit Special Topic Educators 5B-23

24 Licensed Financial Advisor Points To Consider Typically able to teach both book smart and street smart techniques. Cost to employer might be lower due to revenue from sales. Efficient approach for the employee as they can typically use the financial advisor. Need to understand how advisor gets paid. 5B-24

25 Licensed Financial Advisor Points To Consider Well positioned to help employees change behavior. Well positioned to help employees take action. Need to understand what services the advisor can provide. Can the advisor act as a fiduciary? Is the advisor independent or captive? 5B-25

26 Non Licensed Financial Educator Points To Consider Easy to see how they get paid. Easy to find out what they can talk about. Can not give advice/education only. Might be the most expensive option. Focus might be more on book smart versus street smart. May have less incentive to get employee to take action and change behavior. Typically can t help employee implement strategies. 5B-26

27 Adviser Connected With Retirement Plan or Benefits Points To Consider Knowledgeable of your benefits. May be a lower cost option. Need to know what they can and can not talk about. Do they just talk about their own products? They may only have a specific narrow area of expertise and not be suited for a broad audience with different needs. 5B-27

28 Adviser Connected With Retirement Plan or Benefits Points To Consider May only be able to focus on book smart education. May not be best suited to help people take action. Possible conflicts of interest. What is good for the plan, may not be good for the participant. 5B-28

29 Special Topic Financial Educators Points To Consider Helps provide varied education from topic specific experts. Fills in the gaps of your financial education program. Social Security Medicare Financial Aid Identity Theft Please share other topics with us. 5B-29

30 Combination Of Different Styles Points To Consider Might provide you with the most flexibility and ability to provide unique content. Might provide flexibility to provide a cost effective program. You can use the best educators/advisors based on the topic or need. Information and philosophies may differ between advisors/educators. 5B-30

31 Red Flags Highlights Not having a financial education plan. Not knowing how your advisors/educators get paid. Not knowing what your educators can and can t talk about. When potential advisor/educators don t offer information. You need to ask questions. When advisors focus on returns and not process. 5B-31

32 Questions To Ask Potential Advisor/ Educator Highlights How do they get paid? Flat fee, hourly, commission, combination? What licenses do they hold? What designations do they have? Ask about recent continuing education programs they have attended? Review their brokercheck report. 5B-32

33 Questions To Ask Potential Advisor/Educator Highlights Are they independent or captive? Can they act as a fiduciary? Ask them why they want to educate your employees. Ask them if they have any biases towards any products. 5B-33

34 Call To Action Review your current financial education program. Review, determine and monitor the type of financial education that will be helpful to employees. Review, determine and monitor what type of financial educator is best suited to meet your needs. Review, determine and monitor the frequency of financial education programs. Review, determine and monitor how you will measure the success of your program. 5B-34

35 Thank you! The information provided within this presentation is general in nature and should not be construed as comprehensive financial, tax or legal advice. As with any financial or legal matter, consult your qualified securities, tax, or legal representative before taking action. 5B-35

36 Questions To Ask When Selecting a Financial Advisor/Educator Advisor/Educator Compensation 1. How will the advisor/educator get paid? Will it be a flat fee, hourly rate, based on assets, based on number of employees, commissions, bonus, soft dollars or a combination of any of the above or something different? 2. How will expenses such as travel, copies, etc. be handled? Are related miscellaneous expenses built into the program cost somehow or are they billed separately? What expenses are reimbursable and which ones are not? 3. What other services/functions does the advisor/ educator perform in their line of work that they receive compensation from? 4. Does the advisor/educator have a choice on how they get paid and / or do they get paid differently depending on the product / strategy? Advisor/Educator Professional Experience & Qualifications 5. What experience does the candidate have with financial education? 6. How long have they been in this business? 7. Find out about their professional background? 8. What licenses does the advisor hold? When did he or she receive them? Which ones are they currently studying for? 9. What designations if any do they have? When did he or she receive them? Which ones are they currently studying for? 10. Find out if the advisor / educator will or can work based on the fiduciary standard of care or the suitability standard of care? 11. Have the candidate talk about the last few continuing education programs they have attended or ones that they are planning on attending? 5B-36

37 Advisor/Educator Compliance 12. Ask the candidate for a copy of their brokercheck from FINRA/SEC and have them go over it with you. If they are part of a group, also review the brokercheck of the people who they work with and you might work with. 13. Ask them to describe/explain the process that educational materials need to go through in order to be used in their financial education setting? What is the approval process? Do they need to go through compliance? Are materials prepared in house or are they purchased from a third party? Advisor/Educator Philosophy, Content and Goals 14. Ask the educator to describe his/her philosophy on financial education? 15. Ask the advisor if education is just general in nature and not product specific? 16. Ask them about their educational style. Is it more text book with definitions, do they use case studies, stories or other examples that might help in the real world? 17. If the advisor/educator will talk about any specific products, have them explain which products they will talk about, why they need to talk about those products and how they will present the information? 18. Ask them how they help employees change their behavior so they take the action needed to help them improve their financial situation in certain areas? 19. Ask them how they measure the success of the program? 20. Ask them how they plan to follow up with employees who have questions or have a need that needs to be addressed? 5B-37

38 21. What would need to happen in order for them to feel like they did a great job? 22. Find out if there are any limitations as to what education they can offer? 23. Ask them about what they like to do, hobbies, etc. to see if/what they have in common with your employees? Advisor/Educator Support 24. What kind of support does their business help them with? 25. Is this person part of a team or will he or she be the sole educator? If part of a team, complete due diligence on all of the team members. 26. How will it work if this person is unavailable such as being on vacation or sick? 27. What will happen if the person leaves the business or changes jobs? Advisor/Educator Business Agreement 28. Ask about any paperwork/agreements/contracts that need to be completed in order to work with the financial educator? 29. Ask if there are any up front startup costs? 30. Ask if there are any termination costs? 31. Ask how the agreement can be terminated by any party? Securities and advisory services offered through NATIONAL PLANNING CORP, (NPC) Member FINRA, SIPC, and a Registered Investment Advisor. Trilogy Financial Services and NPC are separate and unrelated entities. The information provided within this presentation is general in nature and should not be construed as comprehensive financial, tax or legal advice. As with any financial or legal matter, consult your qualified securities, tax, or legal representative before taking action. 5B-38