Employees today face inflating health care costs, stubborn gender pay gaps and rising student loan debt, among many other challenges that have the power to derail their financial lives.
At the same time, volumes of research show employees who work for companies with generous retirement, insurance and health care benefits are much more financially well and focused on long-term wealth building opportunities. Given this state of affairs, a natural conclusion for plan adviser professionals aiming to grow their own businesses might be to push their existing and potential plan sponsor clients to be more generous to employees.
Josh Ulmer, financial adviser with the Wealth Management Division of Morgan Stanley, and winner of the 2017 PLANSPONSOR Retirement Plan Adviser of the Year designation, believes this sort of paternalism advocacy complements the goals of the adviser, the participants and plan sponsors. It is not easy to inspire an employer to be more paternalistic, he warns, but it will pay dividends for pretty much everyone involved in servicing the retirement plan and other benefits.
“Participants want and expect broad support from their employer,” Ulmer notes. “One could also argue that there are substantial long-term benefits for the employer to be gained by assisting their people in getting to a secure retirement. This can help achieve lower health care costs, reduced absenteeism and unclogged career paths.”
Mike Volo, senior partner at Cammack Retirement Group, also recognized with a 2017 PLANSPONSOR Plan Adviser Mega Team of the Year designation, agrees. He observes that, when it comes to retirement savings, participants with more generous benefits report greater trust and general enthusiasm towards their employer. Frankly, he adds, “employer are fooling themselves if they believe their employees don’t want them to be more generous and paternalistic.”
Volo quickly adds that installing “paternalism” in the retirement plan or another benefits program does not simply mean throwing big sums of additional benefit dollars around. It can simply be a matter of more clearly and effectively advertising the benefits that are already in place—making sure people understand what is available from their employer and how it can best be taken advantage of.
As Ulmer and Volo both observe, some employers are simply more libertarian-minded and perhaps never view it as their responsibility to be paternalistic about health care and retirement benefits. However there are many employers/employees who could benefit from frank discussions in this area.
“I have heard plan sponsors suggest that progressive or paternalistic plan design is too heavy handed and it is not their responsibility to make sure people utilize company benefits appropriately,” Ulmer says. “Also, some organizations lack the administrative capabilities to sufficiently oversee what could amount to increased complexity in their plan, while others could be dissuaded by industry-specific challenges such as high employee turnover.”
Ulmer adds that swings in company culture “do not occur overnight … It’s a process, not an event.”
“The adviser’s role is to consistently bring the right information and data to the committee regarding best practices, so that they’re making informed decisions,” Volo concurs. “Once you are trusted and respected by the committees, they’ll be more comfortable with these potentially tough conversations around benefits generosity and paternalism.”
Ulmer agrees and emphasizes the critical role advisers can play in helping employers set more paternalistic goals and aims in the benefits programming.
“Advisers have a duty to educate and inform clients about the facts and circumstances around meeting their respective business objectives, and the financial health of the employee population is a big part of that,” he concludes. “In the end, an adviser should outline the various paths by which a plan sponsor can meet their objective and structure a solution to best meet this objective consistent with the organization’s culture.”