The Need for Comprehensive Financial Education

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The Need for a Comprehensive Financial Education
Program Presented by The Lemily Group 1213
Broadway Ave Bowling Green, KY
42104 270-842-8325 270-842-8312(fax) www.lemilygro
up.com
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TRUE or FALSE..
An employer could be personally liable for
investment losses resulting from poor investment
choices made by an employee.
TRUE!!!!!!
According to a recent study, more than 90 of
human resource officers believe that employees
are ill-prepared to make their own retirement
decisions.
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TRUE or FALSE..
Having your 401-K provider come in once per year
to explain the investment plan options, insures
you have protection under 404-C regulations.
FALSE!!!!!!!
If the plan provides too little information for
the employees to make informed choices, then the
employer will lose legal protection under 404(c)
regulations and will be liable for the employees
investment selections. Therefore, absent 404(c)
protection, employers are potentially liable for
an employees imprudent investment decisions.
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• What if someone could show you the employer a
  plan to achieve the following?
• Reduce fiduciary liability, as well as.
• Increase worker productivity

• Increase participation in retirement plans

• Increase morale, work satisfaction and loyalty to
  employer

• Reduce Social Security payroll taxes

• Reduce health care premiums

• Reduce pressure to increase salaries and wages

• Reduce turnover by attracting and retaining
  qualified workers

• Reduce absenteeism due to personal financial and
  legal
• matters

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Research shows that good financial wellness and
key measures of high worker productivity are
positively related.
Research also shows that workers with poor
financial wellness are the people who are absent
from work more frequently.
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Studies show that employers who provide financial
education programs will earn a positive return
for every dollar invested.
We have also learned that typical retirement
education programs have limited effectiveness.
Over the past several years, the employers who
have established a comprehensive financial
education program for workers, have found them to
be beneficial for employees, human resource
officers and employers.
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Most employers ignore workers who have personal
financial problems and do not realize the high
cost of doing so.
Warning!!!
The reality is that employees with personal
financial problems cost employers a lot of money.

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The fact is that a growing number of employers
now realize that comprehensive financial
education is a key factor in both recruitment and
retention.
WHY?

• An employers best workers are typically people
  who are in control of their personal finances and
  contribute to their pension plans.

2. These employees are happier with their
financial lives and it shows in their work.
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Even the most astute employee needs accurate
information. There are many situations outside
the scope of employee benefits that affect the
personal wellness of an employee in addition to
finances. Such as

• My employer provides many benefits-How can I be
  sure I am taking full advantage of them?

2. What is the difference between rebalancing
and reallocating my 401-K portfolio?

• I am divorced, my ex has remarried and I have
• under-age children-How can I make sure my
• children receive my 401-K?

4. My spouse has a pension at work and is
nearing retirement-How can I be sure were
choosing the right option?
5. Is there a place to call to get answers to
these questions and more, and can I call after
hours?
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According to a recent study, more than 90 of
human resource officers believe that employees
are ill-prepared to make their own retirement
decisions.
Remember This!!!!
In the same study, 86 of human resource officers
felt that their employees needed financial advice
regarding retirement assets above and beyond the
educational information they are currently
receiving..
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These officers had three primary concerns
1. To help employees make better financial
decisions
2. To increase plan participation
3. To enhance the overall value of their benefit
packages
Since fiduciary liability concerns often make the
employer hesitant to provide advice, the need for
third party advice becomes increasingly
important.
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According to one research study, the most
important priority for employers over the next 5
to 10 years is employee education. Only 1 of
every 2 employers feel they have sufficient time
and resources to fulfill their fiduciary
responsibility to provide adequate information to
educate employees.
Seminar presentations are an invaluable service
that financial services professionals can
provide when these seminars are offered 401(k)
participation jumps 17 and contribution rates go
up as well. This in turn, will allow the highly
compensated employees to contribute more money as
well.
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Money
Market
Mutual
Fund
It is not unusual to find a employee with
significant money in his or her 401(k) account
who does not know the difference between a money
market fund and a mutual fund.
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According to one survey, 71 of workers either
strongly agree or agree somewhat that they do not
know as much about investing as they should.
Annuities
Mutual
Funds
Market
Risk?
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3 out of 5 employees have not reallocated their
contributions or plan assets since joining the
plan.
WHY IS THIS?
An employees inactivity stems from a lack of
comfort with the plan's investment choices rather
than from a thoroughly researched buy-and-hold
strategy.
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According to a 2003 Retirement Survey, 55 of
workers either strongly agree or somewhat agree
with the statement that they could work until age
65 and still not save enough to meet their
retirement needs.
What causes this?.......
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1. 25 of those eligible to participate in a plan
choose not to.
2. Less than 10 of participants contribute the
maximum.
3. Over 50 fail to diversify their investments,
many over- invest in company stock, and
almost none rebalance their portfolios in
response to age or market returns.
4. Most importantly, many cash out when they
change jobs and very few buy an annuity at
retirement.
Beyond Retirement Seminars A Suggested Model
for Closing the Knowledge Gap By Kenn Beam
Tacchino, JD, LLM Journal of Financial Services
Professionals March 2005
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It is considered prudent to review the
administration and investment components of the
Plan at least once per year to make sure they are
meeting the needs of the employees.
Guidelines
Surveys have shown that Retirement Planning has
risen to be the 1 Employee Benefit issue facing
employers today. Weve already learned that
employees, in general, are not saving adequately
for retirement.
Unfortunately, too many investment professionals
work hard to close the sale and then do not
follow through on maintaining the relationship.
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SO WHATS THE SOLUTION?
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A Comprehensive Financial Education Plan
Provided by
That will..
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..relieve the Human Resource officer of time and
stress spent in the following areas by
redirecting them to us
Addressing questions and claims issues regarding
the group health insurance
Personal financial issues
Legal issues
Family health issues
Retirement planning issues
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Benefit the employer by

• Reducing fiduciary liability, as well as.
• Increasing worker productivity

• Increasing participation in retirement plans

• Increasing morale, work satisfaction and loyalty
  to employer

• Reducing Social Security payroll taxes

• Reducing health care premiums

• Reducing pressure to increase salaries and wages

• Reducing turnover by attracting and retaining
  qualified workers

• Reducing absenteeism due to personal financial
  and legal
• matters

• As well as many other benefits

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Benefit the employees by providing them a single
source to turn to in order to get answers to the
many diverse questions and problems that they may
have.
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If you would like to know how you can implement a
comprehensive financial education program for
your company, call Brian Birchell at 800-499-8325.