Financial planning has been steadily moving down market. A service that once squarely focused on the wealthy has spread to the mass affluent. These are folks often with low six-figure incomes, if that, and retirement portfolios between $100,000 and $1 million.
That means, however, that the profession is still unable to be of much help to the vast majority of Americans. “Right now, the financial planning approach, using AUM as a basis, ignores 85% of the population that lacks enough assets to attract advisor attention,” said industry analyst Bob Veres in an interview with RIA Intel.
And that lack of access to financial planning is having a profound impact in the workplace. A study by Financial Finesse found that “only about 5% of employees meet all criteria of financial wellness.”
A few other findings from that study: 81% of employees in the survey exhibit some level of financial stress; fully half lack any sort of emergency cash fund; and 73% lack a game plan for retirement.
That’s where human resources managers come in. A growing number are adding employer-paid financial planning as an employee benefit.
As advisors approach companies to offer planning as a benefit, they can help explain how improving financial wellness can improve the bottom line. Stressed out employees tend to have higher turnover, higher levels of absenteeism, lower levels of job satisfaction, and are less productive, according to Financial Finesse.
Moreover, providing this valued benefit is one of the best ways that employers can boost staff retention without doling out sharp salary increases. In its 2019 survey of employee benefits, the Society for Human Resources Managers (SHRM) notes that “the talent market is tight. Wage growth has begun to occur, but employers wary of economic uncertainty remain cautious about increasing wage and salary compensation, and some choose to diversify benefits offerings in lieu of paying higher wages.”
Until recently, financial planning sessions were primarily given by 401(k) plan sponsors. These aren’t really planning sessions and instead are narrowly focused pep talks around portfolio choices. Moreover, retirement plan sponsors aren’t always seen as having the same level of fiduciary care as fee-only RIAs.
So how do advisors deliver this employee benefit? A combination of online webinars, along with topical on-site discussions in front of various groups, which are paired with one-on-one sessions that typically last 30-60 minutes. According to a 2017 SHRM benefits study, 36% of employers now provide some sort of online education tools, 35% offer one-on-one financial counseling sessions, and 28% offer group/classroom sessions. It’s unclear if those figures represent investment-only advice or broach other traditional financial planning topics such as debt management, retirement planning, estate planning, and insurance reviews.
Suzanne Goulden, Director of Total Rewards and Analytics at SHRM, notes that much of the financial planning “has historically come through a retirement plan sponsor.” Yet when it comes to more broad-based planning advice, she thinks “it would be really helpful for employers to ramp this up.”
Some firms that have historically helped manage retirement plans—and provide employee education about them—are rolling out full-scope planning services. Peter Hoglund, a senior vice president at New Jersey-based Wealth Enhancement Group, says his firm “moved seven or eight years ago to start lashing planning together with the 401(k) plans.”
But his firm eschews the one-size-fits-all approach. “You have to tailor each of these programs to what each employer wants for their staff,” he says. Some of his clients pay a blanket fee that covers one to two hours worth of real-time planning for each employee per year. Some other employers pay for each employee to receive a full financial plan. Hoglund concedes that providing financial planning as an employee benefit for a whole firm “can be a challenge for a solo planner to handle.”
Hoglund cautions that advisors shouldn’t view the planning counseling sessions as a way to land new clients. “You can’t be in a sales mode, that can lead to bad impressions,” he says.
While employer-paid financial planning often benefits older employees that are nearing retirement, the process is “also suitable for younger executives that need help with cash flow planning, college funding planning, and real estate strategies,” says Catherine Valega, who runs Winchester, Mass.-based Green Bee Advisory.
Ramping up this kind of financial planning practice takes patience. “Sometimes I will talk to people about it and they’ll say ‘I didn’t even now that was a thing,’” says Valega. So some missionary selling will be required.
How can advisor find potential corporate clients? Valega suggests reaching out to firms in your area that manage 401(k) plans, but do not otherwise offer financial planning services.
Advisors may also want to contact human resource executives in their region. SHRM maintains regional chapters throughout the country.
Some advisors have found success through sheer serendipity. Christina Empedocles, who focuses on entrepreneurs in her San Francisco-based advisory practice, finds that her clients will sometimes bring her in to work with their staff. “Business owners are often very committed to their staff’s well-being,” she says. Empedocles typically structures the on-site visit by holding group discussions on various topics and then carving out time for one-on-one sessions as well.
When it comes to fees, there isn’t a golden rule about what to charge. Both Valega and Empedocles charge their hourly rate, which can generate $1,500 to $2,500 per day for the advisor.
Kristi Sullivan, who runs Denver-based Sullivan Financial Planning, structures her planning as a fixed fee, with around $2,000 of the cost being paid by the employer. Like Valega and Empedocles, she also charges a day rate to employers to come in and provide group and one-on-one counseling, often for people that have never met with a financial planner before. “It’s amazing how little knowledge there is among employees on issues around retirement planning,” says Sullivan.
While financial planning as an employee benefit is often aimed at bringing much-needed advice to a broad set of employees, some firms like Houston-based STA Wealth Management squarely focus on company executives. Those clients often have special needs, such as navigating both SEC and company-specific trading restrictions of company stock.
Scott Bishop, an advisor at STA, says that employers see a clear benefit in providing this service. “Proper financial planning can help ensure that an executive’s efforts and interests are aligned with corporate goals, which can help strengthen profits—and a firm’s stock price,” says Bishop.
Providing financial planning over the course of a full day offers a sort of veni, vidi, vici aspect to it. At the end of the day, there isn’t any lingering follow-up work, which can be a great relief to advisors that otherwise have their hands full with the planning work for ongoing clients.
Still, Sullivan says that planning days “can be exhausting. It’s like financial planning improv…you have to be ready for whatever is thrown at you.” But at the end of the day, “it’s rewarding work for sure.”