Wealth management brings up a variety of different considerations for employers, but it doesn’t have to be a daunting endeavor. When it comes time to plan things like personal finances, investments, or even retirement strategies for employees, there are several important steps employers can take to make the process much easier.
To gain the most valuable perspectives on this topic, we reached out to experts with a straightforward question: What are your top three recommendations for employers to make wealth management easier?
Their responses formed a cross section of useful suggestions that business owners can leverage as they make their plans for themselves, their employees, and their companies.
1. Make sure your personal and corporate money is working for you this year by taking advantage of higher interest rates. Even if your financial advisor charges you a small fee for this service, you will still come out ahead with interest rates at 4% or higher. In a money market account, you are still able to use the funds should you need them, but in the meantime, the money is earning interest.
2. Hire a financial advisor! Don’t try to manage this market by yourself. You would never take your car to be serviced by anyone but a mechanic, so don’t trust your investments to anyone but a professional who spends his/her day researching and analyzing the trends in the market. Yes, there is a fee to have your money managed, but it is well worth the rate of return. A bad investment can be a costly mistake and cost much more than the annual fee to have a professional manage your nest egg.
3. Communicate to your employees. Have your 401(k) provider host meetings to show your employees the benefit of contributing to a 401(k). Show your employees how quickly funds in a 401(k) compound and if you match, how quickly the matching funds grow. If you match, your employees are leaving free money on the table, and they need to be reminded of that. You can never communicate too much about the benefits of saving money in a 401(k).
Whether you’re a small business or a corporate enterprise, employers who want to attract top talent and a hardworking team know the importance of offering competitive benefits and pay. For some businesses, that means looking at creative ways to implement wealth management benefits for their employees. Here are a few ways companies can respond:
1. Health Savings Accounts: An HSA is an account that is paired with a qualifying high-deductible health plan. The HSA can then be used for qualifying medical expenses. These triple-tax advantaged accounts can provide a key benefit for employee wellness and retention, while reducing their payroll taxes at the same time. HSAs are funded with pre-tax dollars (up to IRS limits annually). The funds in the account can accumulate over time – there is no requirement to spend the balance each year. Today, 70% of Americans rank healthcare as the most important employment benefit. It makes strong business sense to offer an HSA with the technology that makes setting up accounts and making contributions easy and simple.
2. Financial Education Resources: Financial education provides an opportunity to create a healthier group of employees by alleviating the mental load and stress that they unknowingly bring to work with them every day. Focusing on an employee’s overall health—including their financial health—will allow them to become the best versions of themselves. Community banks like Centier Bank offer free financial education resources online. These courses cover a variety of topics from saving to budgeting to home ownership to retirement and many facets in between.
3. Retirement Plan: A strong retirement plan offering is another way employers can help their employees achieve financial success. The first thing to consider is using automated features in the plan, such as auto-enrollment and auto-escalation. Employers should also consider auto-escalation at a rate of 1% each year, at least until the amount required to earn the full match is reached. This makes the process of increasing deferrals easier for employees, as the increases occur regularly in smaller increments. Finally, employers who offer a matching contribution to their employees provide an incentive for saving, resulting in a higher probability of reaching financial success.
1. Encourage all employees to participate in company sponsored retirement plans and to make contributions to the plan that AT LEAST match those that the company is making.
2. Have the employer sponsor a guest speaker (lawyer, wealth management advisor, CPA) to come in once a quarter to speak on wealth management topics to their employees. Topics can include, but are not limited to, budgeting, basic investment options, importance of life insurance, how mortgages work, etc.
3. Employers (i.e. business owners/C-Suite individuals) should engage in robust wealth planning to plan for the succession of the business. In other words, business owners should design and implement a business succession plan and review it with their wealth management advisor on a quarterly basis.
1. Start early. Albert Einstein was known for saying, “Compounding interest is the 8th wonder of the world.” It’s amazing how much you can save for retirement if you start in your 20s. Good employers will want to encourage their employees to invest in their future by providing retirement savings programs like 401ks that match employee contributions, say 3% or higher of the employee’s salary. But take heart, if you started saving later in life for retirement, the government permits catch-up provisions that allow people 50 and older to save additional money for retirement.
2. Interview more than one wealth management team. Think of your wealth advisor as a financial physician. Find one you trust and feel comfortable sharing your financial life. Get a sense for the firm’s personality and service offerings. Statistics show you’ll stay with your wealth advisor for many years and likeability, service, character, and competence are all important considerations.
3. You’re in the driver’s seat. If the wealth advisor cannot explain what they’re doing with clear and understandable communication, be cautious. A thoughtful wealth advisor will explain clearly how they are compensated, the costs related to the funds they invest your money, and the investment style they use (e.g., passive, active, or a combination of both). Seasoned wealth advisors will have good data to demonstrate their investment returns against standard benchmarks like the S&P 500. Compare how they might perform with your money over 1, 3, 5 or 10 years. One of the great benefits of choosing a capable wealth advisor is that they function as a “shock absorber” for your emotions. They can be a source of comfort and perspective in volatile markets. Skilled wealth advisors will regularly review your investment objectives, such as income tax considerations, time horizon for spending funds, and your risk tolerance for up and down markets. All of these important conversations are done to help create a future where you reach your goals and realize your dreams.
President Biden has signed the SECURE 2.0 Act of 2022 into law along with the Consolidated Appropriations Act of 2023. The SECURE 2.0 Act is intended to help Americans save more for retirement for many years to come. With more than 90 provisions, SECURE 2.0 builds on the SECURE Act of 2019 to change the retirement savings rules and tax incentives to encourage more employers to provide plans for their workers, simplify plan administration, and help workers save more for retirement. Many of these changes will require additional guidance and detail from the DOL or IRS, as well as administrative and programming changes for plan sponsors and recordkeepers. Here are some of the most popular provisions:
Sources: Congress.gov, Finance.senate.gov
First Merchants Private Wealth Advisors
When I think about how to help employers prosper in the area of wealth management, my mind immediately goes to the fundamental building block to success and employers’ greatest asset: their employees.
1. Employee retention and recruitment have been hot topics for the last 18 months or so. One of the best ways an employer can support and retain their employees is by sponsoring a retirement plan (401k, 403b, SEP, SIMPLE) and offering a HSA as a benefit. It does not matter the size of the company, from 1 employee to 5,000, there are plans available to support you and your employees.
2. The second tip is actively encouraging and educating employees about utilizing those benefits. We’ve transferred the burden of planning and preparing for retirement to employees. In order for employees to capture the value of these benefits, they need to understand how to take full advantage of them. Employers need to rely on their service providers to help activate participation with employees. Service providers should be on the front lines for providing education and support to employers.
3. The final tip is to treat ‘financial wellness’ for your employees the same way you would treat physical and mental wellness. If we ask employees to spend more time with us as employers than with their families, how they provide for their families should also be considered. Employees need to be consumers of healthcare and their financial future utilizing the same scrutiny they would in buying a TV, a new car, or a home.
Employers can play a critical role in making their employees feel a little more secure about their financial wellness. Recent studies show that the cost of financial stress, per employee, can amount to over $2,000 per year in lost productivity and absenteeism.
Offering a variety of company benefits and educational resources, to employees including support from trusted advisors and industry professionals, can help reduce some of that stress, regardless of what stage they are in life.
Below are three strategies to consider:
1. Start with the Basics - Awareness. Communication is key – especially when market volatility has employees on edge. Increase awareness and accessibility of benefits and resources to help employees be more knowledgeable and act promptly.
Consider distributing third party resources or create a dedicated financial wellness planning site so that employees can locate timely and pertinent information, and guidance for decision-making. Build in access to great digital tools which offer financial forecasting to assess risks and map out a path to achieve their financial goals.
2. Support for Life’s Many Milestones. Employer-led initiatives can build equity with employee relationships, and in turn, can boost morale and lead to retention.
Whether employees are looking to buy a home, sending a child to college, or weighing options to retire soon – ease their stress by providing year-round support that addresses their stage. With the help of a trusted advisor, launch workshops and webinars to provide employees with guidance and options to solve their specific life stage challenge.
3. Tailored Resources for the More Advanced, Complex Plan. Retirement planning can be complex, largely because it is a process that spans many years and runs through several life stages. Many variables, such as financial and tax implications or family harmony, must be analyzed before creating and putting a plan in place.
Encourage employees, through internal newsletters or mailers, to work with a trusted advisor or professional to assist in short-term credit and cash management needs, as well as long-term investment and estate planning goals.
Easy Money
There are many unique ways to make wealth management a little easier. It doesn’t have to be a major challenge. As these financial experts have described, companies have lots of options to make their finances work a little smarter at every level, employers and employees alike. It all starts with a careful consideration of goals and a few simple moves to position yourself for the best possible opportunities for growth.
