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Anticipating the Future of Employee Benefits

Employers seek help in educating employees about personal finances, benefits choice

by E. Thomas Foster Jr.

Mr. Foster is Assistant Vice President, Strategy and Relationships, for MassMutual Retirement Services, a division of Massachusetts Mutual Life Insurance Co.

Hockey Hall of Famer Wayne Gretsky once attributed his record-setting success to skating where the puck was going instead of where it is. His anticipation of the action on ice earned him the nickname, “The Great One” as he scored more goals than anyone else in the history of professional hockey.
Anticipation is equally as important for financial advisors, especially those who serve the needs of employers for retirement plans. Being ready for future developments and trends can help advisors better serve their clients while giving them an edge over the competition. Failure to be ready can result in being put on ice.

The next development in the employee benefits marketplace is a plea from employers to help better educate employees about their personal finances and benefits choices. Employers increasingly worry that their employees’ struggles with personal finances are hindering productivity in the workplace. Employers are looking for tools and guidance to help employees sort through their personal needs and make better decisions about finances and benefits, prioritizing their choices based on their personal situations and budgets.

Financial distractions

Why are employers suddenly so concerned about their employees’ personal finances? How did employees’ benefits choices and money management morph from a personal choice to a productivity issue? The answer is complicated, especially for many workers.

The 2015 MassMutual Employee Benefits Security Study found that while many people assert they do just fine managing their finances, 37 percent find doing so “somewhat” or “very difficult.” Four in 10 say personal financial problems are a distraction at work. And while most Americans say understanding their personal finances and employee benefits is a priority, 40 percent admit they know little or nothing about them, the study found.

MassMutual’s study was conducted by KRC Research as part of an initiative to help educate workers about their employer-provided benefits and enable them to make better choices in selecting healthcare coverage, insurance protection, retirement savings and other benefits. The study focused on 1,517 working Americans who were at least age 18 in a wide variety of jobs and industries.

The study found that the lack of understanding about financial and benefits issues is widespread. However, some groups found personal finances more difficult than others, including Millennials (58 percent), parents (50 percent), Generation X (47 percent), women (44 percent) and those with annual incomes of $50,000 or less (44 percent). Baby Boomers were the least likely to encounter difficulty in managing their finances (28 percent) or being distracted at work by financial issues (24 percent).

On the surface, most people appear to have their financial house in order. The majority of survey respondents said they prioritize understanding their personal finances (77 percent), having enough medical insurance (74 percent) and being on track to retire comfortably (65 percent). Just below the surface, though, financial chaos reigns.

Thirty-eight percent admitted that they know little or nothing about their employer-provided benefits such as healthcare, life insurance, 401(k) retirement plans and other benefits. Two in five respondents (42 percent) fessed up about being clueless about whether or not they are on track to retire comfortably, the study found.

They don’t know what they don’t know

Despite those findings, nearly half of the survey respondents maintained they either knew everything they need to know about their finances or have learned enough about them already. Some folks admitted that their finances were too complicated or difficult to understand (13 percent), one in 10 said they didn’t have the time to learn, and 9 percent admitted they didn’t know where to go for information.

It’s a familiar story to many advisors: when it comes to personal finances, most people don’t know what they don’t know. It’s also a call to arms for advisors to learn more about their clients’ personal financial lives, not just retirement savings or investments, but review their entire portfolio of investment, health benefits, and protection strategies and products.

It’s a familiar story to many advisors: when it comes to personal finances, most people don’t know what they don’t know.

It’s the same in the employer world. Advisors who serve the retirement plans marketplace can enhance their value to employers by learning and understanding their entire menu of benefit offerings. Some advisors may want to broaden their palette of financial products to include health and welfare benefits and insurance protection products. Those who don’t want to expand into new territory should at least partner with health and insurance protection providers and benefits brokers who can offer and explain those benefits.

Whatever path advisors take, they need to take action sooner rather than later. As the Great Gretsky said, a hockey player misses 100 percent of shots he doesn’t take.

Delivering the right online tools

Another important study finding that reflects a growing trend in the marketplace is the interest in online financial tools. It seems that many workers would appreciate having access to online tools, although four out of five (80 percent) survey respondents said they do not currently use an online financial tool to manage their retirement, healthcare and other forms of insurance.

The current of public opinion reverses itself, however, once the right tools are introduced into the equation. Seventy-three percent of respondents indicated they would likely use an online financial tool if it were available free, especially if it were provided by a “trusted and respected financial services company.” Millennials were the most interested, with 82 percent expressing interest. Other demographic groups that would welcome help from online tools were Hispanics (81 percent), respondents who are parents (80 percent) and Gen Xers (78 percent), many of whom are also presumably parents.

More good news: many respondents indicated that the availability of a free, online financial planning tool would encourage them to enroll in employer-provided benefits. About a third (32 percent) said they would be either “much more likely” or “somewhat more likely” to do so. It’s confirmation that Americans are thirsty for education if only it is available from a simple, convenient and easy-to-use tool.

More such tools are being introduced to the marketplace but not all are equal. Advisors need to perform due diligence on benefits providers to determine what tools they offer that can help workers better assess and manage their finances and benefits. Many tools address needs such as health care or insurance protection or retirement, and some address multiple needs. The best tools provide personalized guidance and recommendations on a comprehensive set of needs based on data about employees’ personal lives and finances, including their family situation, income, budget obligations, financial risks, and current insurance protection and retirement savings.

Another consideration: the most effective workplace tools connect to all benefits, whether or not those benefits are offered by the tool’s provider. After all, few providers offer every benefit or necessarily manufacture the best benefit available in every category.

The goal is to help employees prioritize their benefit needs and selections, and make sound choices. By doing so, employers hope, one source of stress will be removed from the workplace, potentially replaced by higher employee productivity.

It can only happen if the worlds of retirement plans and employee benefits continue to move closer together and, in many instances, actually converge to solve the multiple needs simultaneously. It’s a holistic view that has heretofore been missing in action.

Advisors who anticipate and address these new workplace dynamics are more likely to be successful than those that don’t, at least in the long run. Like the Great Gretsky, advisors always need to anticipate and move to where the marketplace is going, not where it’s now. ◊



This article is for informational purposes only and should not be construed as legal, investment, and/or tax advice. Please consult your own legal counsel and other experts regarding the specific application of the information set forth herein to your own plan and/or circumstances.