Advice as an employee benefit

In this environment, the industry has a very real opportunity to forge long-term partnerships.

Employees are looking for more from their employers than just a job — 80 per cent of working Australians believe employee benefits are an important consideration when joining an organisation. And when they think about benefits, they often mean non-traditional ones such as work/life balance, discounted health insurance, further education and financial advice.

Employers must respond in non-traditional ways if they are to differentiate themselves and strengthen their brand.

In May 2007, a report undertaken for the Financial Planning Association of Australia into attitudes towards financial planning found:

• nearly three-quarters of Australians (73 per cent) have experienced financial difficulty;
• the most common difficulties are being able to understand superannuation (39 per cent), being able to afford the home they want (35 per cent), and meeting major unexpected expenses (30 per cent);
• those who use a financial planner are less likely to encounter financial difficulty than those who have never used one; and
• nine out of 10 Australians (89 per cent) who have used a financial planner have benefited from the experience.

In the current climate, financial pressures on employees are growing. Yet many employers are unaware of what their employees are looking for and missing a valuable opportunity to support and help retain their workforce.

What employees value most

In October 2008, Mercer released the 2008 Benefits Outside the Square Study, which is based on interviews with 600 employees and 150 employers.

One of the key findings of the study was the ongoing disconnect between the benefits employees are looking for and those employers think they are looking for.

The survey revealed many employers continue to underestimate the importance of benefits such as discounted private health insurance, computer/Internet packages, home and contents insurance, professional services, and financial planning advice.

When employers were asked which benefits they thought employees would like, the top ranking item was paid parental leave for the primary caregiver; surprisingly, employees put this well down their own list at equal 14th (on a par with a social club program).

Less than one in three (28 per cent) employers surveyed offered or facilitated access to financial advice as an employee benefit. Yet, among employers who don’t currently offer this benefit, two in five (42 per cent) thought their employees would value it. Also, when employers were asked how they could help employees aged over 50, the top response was to provide planning for retirement programs and financial advice.

In this regard, the responses of employers and older employees were closely aligned.

When older employees were asked how their employers could assist them in preparing for and transitioning to retirement, their top response was planning for retirement programs and financial advice.

How can employers assist employees aged 50 and over?

Question for employees (50+): how can your employer help you prepare for and transition to retirement?

1. By providing financial advice, guidance and education.
2. Be co-operative/understanding/helpful.
3. Reduce working hours/consulting opportunities.
4. Succession planning.
5. Other.

Question for employers: how can you best help older employees (aged 50+)?

1. Planning for retirement programs and financial advice.
2. Flexible work/part-time/ reduced hours.
3. Seminars.
4. Communication/understanding employee needs.
5. Succession planning/trainees.
6. Counselling and mentor program (equal place).
7. Staff recognition.

As the population ages, more employers will look to retain their older employees to help maintain a skilled workforce — the benefits of retaining these employees are widely reported.

The 2008 Benefits Outside the Square Study shows offering access to financial advice is a useful tool to help retain these employees.

The benefits of financial advice

Studies show the majority of employees are unaware the compulsory 9 per cent contribution paid by employers into their superannuation will be insufficient for a comfortable retirement.

In July 2008, the Australian Securities and Investments Commission released a consultation paper highlighting this issue.

“While compulsory superannuation has increased Australians’ level of retirement savings, most people do not fully engage with their superannuation. They have little idea of how much they will have when they retire and how this compares to the amount they will need.”

It’s a statement consistent with the findings of Mercer’s 2008 Benefits Outside the Square Study, which found more than 40 per cent of baby boomers (aged 50 and over) were unsure how much they would need in retirement.

Older people thinking about retirement are naturally more disposed towards financial advice and planning; the results showed that 65 per cent of baby boomers surveyed have made some preparation for retirement.

This is particularly true for those who have seen a planner. Of these, 41 per cent have already made many preparations for retirement. Only 8 per cent of those who have not seen an adviser were equally well prepared.

However, while often associated with upcoming retirees, financial advice as a benefit has broad appeal across all ages and incomes.

A study by Rice Warner found, when comparing the return on cost of advice, young families and wealthier families building wealth ultimately returned the greatest financial return.

There is also an emotional payback, which can be particularly important to employers.

Rice Warner’s research found peace of mind was the key intangible benefit resulting from having financial control as a result of seeking financial advice, which it deemed ‘priceless’.

Another important result is the way employers can enhance their reputation and standing as an ‘employer of choice’ by showing themselves as open to new ways of working with their employees.

Initiatives such as providing financial advice can open up channels of communication within the workplace.

For example, in the case of one of our recent clients, offering financial advice to a workforce with a high proportion of baby boomers allowed the company to start talking to these experienced employees about their futures, the number of days they wanted to work, and how they could transfer their knowledge to others in the organisation.

Many employees may also feel more comfortable talking with advisers who come with the endorsement of the employer.

Offering advice in the workplace might therefore be an effective way of giving employees more confidence to seek advice in the first place.

Conversely, some employers may be wary of giving an implied endorsement. Employers can address these concerns when developing communications to inform their employees about a financial service.

Financial advice in the workplace

Service delivery should be modified to suit the organisation’s needs, and is most commonly a combination of:

• Education services. Topic-specific seminars that can be as short as an hour, or longer (full-day sessions). Seminars can be tailored to key demographics, for instance, younger professionals, employees aged between 45 and 55, and those 55 and over or approaching retirement. Education can also be delivered online.
• Personal advice. One-on-one consultations with a financial adviser tailored to an individual’s circumstances, lifestyle, attitude to risk and financial goals. It may also include access to a helpline and printed information and resources.

The key to successful implementation is to target groups based on the stage of their career, the job they are in and their age.

Offering financial advice as a benefit

There are a number of things employers that are considering offering a financial advice program should bear in mind:

• What benefits do your employees want?
• If there is a demand for financial advice, should you add it to your benefits suite? If you already provide financial advice but it is under-utilised, could it be communicated more effectively; there may be a perception financial advice is only for ‘older’ or ‘wealthy’ employees?
• How can access to financial advice be funded? Our research has shown the majority of employees believe the cost of employee benefits should be shared between the user, employer and service provider.
• Are there any Fringe Benefits Tax (FBT) implications? If packaged into employee benefits, there may be a flow-on FBT effect. However, there may also be FBT concessions on some items. It’s best to explore this with specialists in the area.
• What’s the best format or program design? Consider on-site financial education workshops, followed by individual advice sessions for employees.
• Who should deliver it? Only use an accredited financial adviser.

Planner opportunity

Research shows offering financial advice as an employee benefit is valued by employees, who put it higher on their list of preferred benefits than many employers expect.

A workplace financial advice program could help to increase employee motivation and retention among key employees, enabling employers to build and maintain a skilled and productive workforce in a competitive environment where retaining good staff is paramount.

With this in mind, the financial planning industry is well-positioned to make successful inroads to organisations’ human resources departments and nurture a long-term partnership with its people.

The reality is that people are vulnerable in the current market and the time is right to expand our reach through alternate avenues.

David Anderson is the Asia-Pacific business leader of Mercer’s outsourcing business.