As a business owner, you probably offer your employees a 401(k), SEP or other type of retirement plan. But do they understand its value, and how to invest it properly to achieve financial success? Since most companies do not offer pensions, an employee’s 401(k) is usually the only retirement savings an employee has, making proper use of it one of the most important decisions in your employees’ lives. The benefit of learning how to properly handle money and plan for retirement can take stress off of your employees, enabling them to better focus on their work, reduce worry and be happier at home and in their jobs. A win/win!
Employers in a recent Deloitte study on important company plan issues rated providing the right investments to help participants achieve retirement goals the most important by 89%, 81% rated improving participant education next most important, and 78% of employers believed that retirement readiness of active participants was either very important or quite important.1 But is your 401(k) provider doing this for your employees? Or just providing a lot of information and really no or little guidance?
I recently had a client tell me that her employer’s 401(k) provided thousands of investment options but when she called to ask the 401(k) provider what to invest in, she received little or no guidance. The investment firm’s employee even told her that they were not allowed to make recommendations. Is it that the company does not want the liability for what their employees say? Or is it even worse than that?
According to Investopedia, up to 90% of financial advisors fail in their careers and the amount of certified financial planners (CFP®s) in the U.S. is declining each year, due to lack of clients, lack of proper training, and the difficulty of making a living on commission only sales.2 Many financial planners make the majority of their money from commissions, and with the advent of ETFs and modern portfolio theory, fewer people are trading frequently. Younger planners often have large student loan debt, making it difficult for them to start a new firm without credit, experience and financial stability. And most have little more than a few weeks of study and having passed a Series 65 test as their level of experience. Where do they end up? In salaried positions with the big investment firms, insurance companies and banks, with little to no experience advising clients. No wonder the firms don’t want them to advise 401(k) employees and clients!
What’s the answer? Consider providing education, financial counseling and advice to your employees as a great, but low cost, employee benefit! According to the Deloitte study, only 21% of plan sponsors conducted a retirement readiness assessment for employees. We offer financial education to employers and their employees, 401(k), SEP, 403(b), IRA, and other retirement solutions to our business clients. Let’s talk about how you can help your clients ensure their long term financial success.
*Advisory services offered through Paul Winkler, Inc. (‘PWI’), a Registered Investment Advisor. PWI does not provide tax or legal advice: please consult your tax or legal advisor regarding your particular situation. This information is provided for informational purposes only and should not be construed to be a solicitation for the purchase of sale of any securities.
1 Annual Defined Contribution Benchmarking Survey, 2013-2014, International Foundation of Employee Benefits Plans, Deloitte Development LLC.