Data & Research March 31, 2016

Financial Engines: Americans Strongly Back Fiduciary Reform

A strong majority of investors surveyed by Financial Engines believes advisers should be legally required to provide “non-conflicted advice” in retirement planning contexts.
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Americans tend to have a tough time determining if their investment adviser relationship is subject to any potential conflicts of interest—or even if it is a fiduciary relationship—according to a new investor survey from Financial Engines.

In fact, according to the survey, while 77% of Americans want the government to act to bar all conflicted advice, “nearly half mistakenly believe their adviser is already obligated to act in their best interest at all times when providing retirement advice.”

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A similar amount, 73% of respondents, said they felt it was “very important that all financial advisers be legally required to meet this standard.” Financial Engines says the numbers are pretty clear: Americans want a strong fiduciary standard and a government that tamps down on conflicted advice wherever it can.

The research is timely given the pending publication of the final form of the Department of Labor’s fiduciary rule, which many expect to take a very tough stance on potentially conflicted advice in the retirement plan domain. Beyond showing Americans’ general support for the DOL’s push, the Financial Engines survey also shows “just how confusing the financial services playing field can be for retirement investors.”

Digging into the numbers, almost half (46%) of Americans mistakenly believe that all financial advisers are already required to put their clients’ interests first when providing retirement investment advice. Among those currently working with financial advisers, a sizable number (41%) said that they were not sure if their adviser was a fiduciary or not.

NEXT: Backing the DOL

The statistics match some of the reasons DOL cites for pushing hard for a new, tougher fiduciary standard, which would go a long way towards requiring all advice given to retirees be fiduciary advice. Not surprisingly, industry providers have warned that the rulemaking, even if well-intentioned, will lead to unintended consequences and less advice overall. They argue the likely drying up of low-cost, non-fiduciary advice will do more harm to the typical American's pocketbook than eliminating rare, outlier cases of conflicted advice will do good.

Financial Engines suggests part of investors’ confusion “may be fueled by industry jargon.” Related to this, less than one in five (18%) of those polled said that they knew what it meant for a financial adviser to be a “fiduciary.”

For its part, Financial Engines seems to back the forthcoming fiduciary reform, suggesting that under current rules “advisers are legally permitted to steer retirement assets into investment funds that are not necessarily in their clients’ best interest but deliver commissions to the adviser.”

“We expect the new rule to curb that practice,” says Christopher Jones, chief investment officer at Financial Engines. “Our research shows that even if people may not fully understand the intricacies of who is a fiduciary and who is not, they have a clear preference for advisers who are legally required to put their clients’ best interests first.”

Additional findings from the survey, “In Whose Best Interest? What Americans know and what they want when it comes to retirement investment advice,” are reported on the firm’swebsite.  

Data & Research March 31, 2016

Each Company Needs its Own Financial Wellness Program

It may seem obvious what financial help each generation needs, but when employers ask employees what they need, they may be surprised.
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 The right design of a financial wellness program and how a program will help employees and employers differs by organization.

“You can map out the location and average age group of an organization and usually guess what employees need most and what will have the best effect for the company,” said Alex Assaley, lead adviser retirement plans at AFS 401(k) retirement services, in a webinar sponsored by GuideSpark.

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Budgeting, debt management, retirement planning and saving for health care are the top financial education needs of employees overall, he says, but plan sponsors need to get feedback from employees in order to know how to customize their financial wellness programs.

It may seem obvious that young employees just starting out need help with budgeting, or that pre-retirees need help with retirement planning, “but you may be surprised,” Assaley said. He noted that life events are what drive financial decision making—getting married, purchasing a home, having a baby—so the best way to start is to spend a lot of time listening and learning from employees about their priorities.

Adam Potter co-founder and president of SimpleFi, said “We’ve seen employers are getting more sophisticated about what they are asking from financial wellness programs. We are constantly asked by employers to add different media for communications as well as different topics.”

Potter says financial wellness programs are a good benefit to offer because money problems stress employees out, and there are a number of research studies that show financial stress distracts workers and results in lower productivity and engagement, as well as absenteeism. “It’s not always a fear of not having enough for retirement; it’s about making ends meet day-to-day,” he said, suggesting that employers decide how financial wellness aligns with the mission and culture of their organizations.

NEXT: Barriers and tips for financial wellness programs

Employers have shown an increased amount of interest in offering financial wellness programs and resources, and a recent GuideSpark survey found more than three-quarters (78%) of employees say they would choose to join a company that offered financial health benefits over one that didn’t. Assaley says a good financial wellness program sets goals, monitors progress and tracks results for both employees and employers. “It inspires employees, but also helps show employers their return on investment (ROI) and how it drives success in their companies,” he said.

Measuring ROI is important, because Potter notes that one of the barriers to offering a financial wellness program could be how to fit it into the company’s budget. But, Assaley said it is usually well worth the commitment.

Another barrier, according to Assaley, may be a lack of resources within the company, but employers can use advisers or financial wellness program providers. Potter added that companies can use different resources for different topics, such as a budgeting expert or student loan financing expert.

One of the biggest challenges is employee engagement, Assaley added. “If you have a leader at the organization that will champion the program, you will get more buy-in from employees,” he said.

Assaley said employers need to make financial wellness programs fun and easy, and Potter said technology can help facilitate this. Assaley noted that, in particular, younger employees like to consume information in quick pieces like through Twitter, Instagram, or other social media. However, other demographics may want a human touch.

Other advantages of using technology for financial wellness programs, according to Assaley, is it can help scale the program, make the lives of HR staff easier, and provide privacy for employees who do not want to share financial information with their employers.

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