Let’s say your employer has announced yet another benefit: financial wellness services at a great price that provide everything from retirement planning consultations to money management tools.
Before signing up, weigh these three factors: the services offered, confidentiality and your ingrained financial habits.
Typically, financial wellness programs offer an array of proactive financial planning tools that help you better manage your money in the short term (through budgeting, credit counseling and the like) and in the long term (retirement planning).
Taking advantage of such help can pay off. You might net as much as 3 percent more in your median annual returns, according to research conducted by Aon Hewitt, a benefits consulting and insurance company that offers such programs. The study examined results from 2006 to 2010, and looked at eight major 401(k) plans representing more than 425,000 participants and $25 billion in plan assets.
“It’s about understanding basic money principles so that employees have money to invest,” explains Rob Austin, director of retirement research at Aon Hewitt. “It’s more fundamental than just a raise.”
Here’s how such programs typically work: Your employer negotiates a “bulk rate” fee structure with a third party, such as a financial investment and advisory service. You can get financial advice and tools through the channels provided – online, via phone or sometimes in person – and that can give you a level of expert guidance you might not have been able to otherwise afford. You still have to pay a fee for the services.
The initial consultation is typically free, and fees for financial benefits depend on the arrangement your employer has with the financial advisory organization. For example, the Consolidated Credit Counseling Corp., which participates in some employee assistance programs, offers counseling on financial management at no cost, but charges $25 monthly for debt management if that service is warranted, according to April Lewis-Parks, the organization’s director of education and communication.
According to Aon Hewitt, 44 percent of employers currently offer online financial advisory services, and 35 percent offer phone consultations. Lucky employees get in-person meetings with financial advisors at 23 percent of employers. About three-quarters of employers expect to expand their financial wellness programs this year.
Austin explains that a key motivation for employers is to keep employees’ minds off financial irritations and on their work. Many employers also realize that few employees below the executive level have enough money – in investments or income – to afford a personal financial advisor. Rank-and-file employees are also less able to afford a financial misstep. “Most people don’t have the time or knowledge to make specific decisions about investing. Professional assistance makes a difference and also makes people more attuned to their plans,” Austin says.
As you click over to the new financial wellness intranet and stare at the array of options, consider exactly what your company is offering: planning services or cleanup services?
During the Great Recession, employers saw many employees distracted by fears of foreclosure, mounting credit card debt and other financial sinkholes, says Bill Danylik, chief corporate development officer for Employee Assistance Group. Firms like his offer one-stop shopping for all kinds of help, from substance abuse to credit counseling.
If the financial wellness program is offered through an employee assistance program, it might be more of a crisis intervention option than a bona fide planning service. If you’re not sure, ask. If it is an employee assistance program, you will likely be referred to a credit counseling or basic budgeting service offered by a nonprofit group in your community.
The next consideration is confidentiality. You have a federally protected right to health care information privacy through the Health Insurance Portability and Accountability Act of 1996. No such law exists for financial information, says Jason Tremblay, a partner with labor and employment law firm Arnstein & Lehr LLP.
Your employer is unlikely to ask for details about, say, the effect of your impending divorce on your retirement plans, not because it can’t, but because your boss actually doesn’t want to know.
“Most of the time, employers are very hands-off,” Tremblay says. “The employer does its due diligence to make sure it’s a reputable advisor, and they make sure that they are not liable for making actual investment decisions, and then they’re out of it.”
As you establish your relationship with the advisor or advisory service provided through the plan, ask about confidentiality. With the possible exception of payroll deductions (so you can automatically save, enacting the advisor’s advice), your employer shouldn’t be able to detect anything about your discussion or decisions, Tremblay says. Still, review the fine print for disclosures about disclosures.
Finally, ask yourself: Will I really follow the advice I get from this new advisor?
Aon Hewitt research found that younger employees with less saved were more likely to enroll in a financial wellness program. Those closer to retirement were less likely.
In fact, not getting on board correlates with two factors: higher risk levels in employees’ portfolios and inconsistent investing philosophies that result in lower returns.
If your employer has made it easy and affordable to get financial guidance, think twice before rejecting it. At the very least, you can get an expert opinion about the investing decisions you’ve made so far.