Do-It-Yourselfers realize lower returns than others who seek financial help. Is it time to rethink your strategy?
By Carol Patton
Eat right. Manage your stress. Get financial assistance.
For years, employers have been providing employees with information and professional advice about how to get into shape -- physically, emotionally and financially. But it's this last category that's causing some HR executives to scratch their heads, wondering what went wrong.
Despite being offered free financial resources, only a handful of employees take advantage of them. With limited knowledge and skill, they make key financial decisions and investments on their own, ignoring experts who are only a phone call away. These do-it-yourselfers -- or DIYers -- often make poor choices that yield low returns or shrink their savings and prospects for a comfortable retirement.
According to the 2014 annual Guardian Workplace Benefits Study, four in 10 employees who identified themselves as DIYers were falling "significantly behind their peers on prioritizing and meeting key financial objectives." More than half (52 percent) of the 1,667 employees polled credited their financial preparedness to the benefits and retirement plans available through their employers. Yet, many DIYers don't want help, and only 25 percent of millennials in the workforce take advantage of learning opportunities offered by their employer, states the report. The rest rely on non-expert sources such as family and friends to help guide their financial decisions.
Quite alarming news, to say the least, but some HR leaders are doing something about it, determined to change these results into positive outcomes. Through communication campaigns and employee promotions that include financial education, assessments and virtual fairs, they're helping employees not only save more, but also encouraging them to partner with financial experts in hopes of growing their savings, investing wisely and securing a better future.
Guardian's survey results aren't really surprising for Michael Martin, total wellness director at Ascend Performance Materials, a chemical manufacturer in Houston with 2,200 employees.
Back in 2009, when Ascend acquired the 60-year-old company formerly known as NyCo, some 20 percent to 30 percent of its workforce fell into the DIYers category, mainly because their investments were limited and not diversified, and they had been draining their 401(k) accounts by taking out loans against their retirement plans.
"A lot of our employees were doing their own thing ... without a whole lot of guidance and education," Martin says, adding that, from a debt-cash-management perspective, this scenario was alarming. "They were making decisions that probably were not in line with what financial planners would consider healthy actions or decisions."
Last year, Ascend's HR department partnered with PricewaterhouseCoopers and launched several wellness initiatives while keeping the same benefits offered by the former owner -- online retirement information and access to a call center.
The company paid $100 to each employee who completed an annual financial-wellness assessment and spoke with a PwC certified financial planner. While more than half completed the assessment and received a scorecard that rated their status on financial categories such as debt management, Martin says, slightly fewer -- roughly 45 percent -- spoke with a planner. (Some of this discrepancy can be explained by the fact that some employees, such as senior executives, already had a planner.)
Based on the results of employee assessments, Martin says, debt management and retirement planning topped the list of concerns. So HR conducted multiple, on-site workshops addressing those topics. Attendance was "impressive," he says, explaining that between 25 and 40 employees have participated in the workshops, held either before or after their 12-hour shifts.
HR also introduced web tools to help employees create a budget and launched an aggressive campaign via multiple touch points, such as home mailers and posters in employee break rooms, to push employees to call a PwC financial planner.
Among the most important components of the overall campaign is that each site owns its own program by supporting a total wellness committee consisting of a cross section of employees who promote the workshops, assessments, on-site tools and professional resources.
Although hungry for financial information, Martin says, many DIYers never felt comfortable disclosing their personal information, fearing it would be leaked to others throughout the organization.
What changed their minds, he says, was that early on, HR conducted health-risk assessments and launched a biometric-screening program. Employees developed confidence in the company and PwC after realizing their health information remained confidential.
"Our overall mission is having debt-free families," Martin says, adding that his staff is considering developing results-based incentives that encourage employees to use financial advisers. "[DIYers now] have confidence that, with the resources they have access to, when they exchange information or data, it's going to be private and those providers are truly there to help them and their family ... ."
Changing Their Ways
Perhaps an even bigger challenge for employers than ensuring confidentiality is changing employee behavior among DIYers. Providing education is not enough. Neither are self-help tools, because DIYers don't use them in the same way professionals do, says Kent E. Allison, partner and national leader of PwC's employee-financial-wellness practice in Florham Park, N.J.
"Most [employers] are moving toward the financial-wellness [strategy] that tries to help employees change their behavior [rather than let them] figure it out on their own," he says. "Employers are analyzing data (such as the balance in their retirement or investment accounts) to look at what employees are doing. If they're not investing or not investing wisely, [these employers] know that and are taking a proactive approach ... by providing investment or professional guidance around those specific behaviors."
Allison believes that no amount of online tools can ever replace a financial adviser or coach. As good as they may be, he says, tools can't see the full picture and offer targeted advice.
HR needs to create momentum for behavior change and reinforce that behavior through immediate rewards so DIYers continue down that path, Martin says, adding that gamification is one example of an effective approach. Employees need to feel good about what they're doing and achieving, he says, and not become overwhelmed like deer in headlights.
"[HR] has to be more proactive about changing those behaviors," says Martin. "It often starts with increasing employee awareness about the need to change, and then helping remove the obstacles that prevent them from changing and ultimately achieving sustainable behavior change."
Some DIYers don't realize the benefits of working with financial advisers. To enhance their understanding, offer real-life income illustrations, says Scott Colangelo, managing director at Qualified Plan Advisors in Kansas City, Mo.
Educate employees about the cost of making poor decisions by showing real examples of how people perform better with financial assistance and underperform without it, he says.
Another approach is to invite experienced employees -- not management -- who are respected by many members of the workforce to speak at employee financial-planning meetings. Since some workers distrust financial advisers hired by their company, these individuals can serve as ambassadors, sharing their thoughts and financial experiences while promoting financial-wellness education and guidance.
But above all, he says, make it personal. During financial seminars, help DIYers apply financial lessons to their own circumstances.
"We use paper [and pencil] so we can -- right then and there -- walk them through their own budget and investment [decisions]," says Colangelo. "You can do the most customized education on the face of the earth, but if they're not putting their own life down on paper, they're not engaged and it won't have a [positive] impact."
The same holds true for seeking professional advice.
A report released in May by Financial Engines and Aon Hewitt titled Help in Defined Contributions Plans: 2006 through 2012 and based on a survey of nearly 750,000 employees found those who used "help" (defined as target-date funds, managed accounts or online advice) earned higher median annual returns than DIYers. The annual performance gap between those returns was 3.32 percent. For a 45-year-old recipient of such help, that could translate to 79 percent more wealth at age 65, compared to DIYers at the same age.
Just as scary, 65 percent of DIYers had inappropriate risk levels, states the report. Approximately two-thirds assumed too much risk while the remainder took on too little.
"We are definitely seeing that individuals who are not getting professional assistance are trailing those receiving professional guidance and help in investing and saving in their 401(k) plans," says Rob Austin, director of retirement research at Aon Hewitt in Charlotte, N.C.
However, some employees are forced into DIY status because their employer doesn't offer such services. Last year, Aon Hewitt surveyed 400 large employers about their retirement plans and discovered that online guidance is provided by 55 percent of the plans while only 52 percent offered 401(k) accounts that are overseen by managed account providers who relieve employees from making ongoing investment decisions.
Even so, HR needs to look beyond 401(k) plans and help all employees save more by better managing the financial aspects of their lives. As an example, Austin points to concierge services offering custom financial services or online tools such as HelloWallet.com and Mint.com that help employees manage their money by learning how to stretch their paychecks or deal with credit-card debt. More companies are also offering three-tiered financial services based on one question: How financially savvy are you? To help DIYers identify what level of guidance they need, Martin says, HR can develop simple quizzes or mock profiles, then ask employees to choose the profile that best matches their financial circumstances.
American Express has been offering similar opportunities for the past several years, building a culture that encourages DIYers to both use financial experts and share their money management experiences.
In the mid-2000s, fewer than 5 percent of its 26,000 U.S. employees accessed the company's free financial-planning services, says Barbara Kontje, director of Retirement Americas and Smart Saving at the New York-based global financial-services corporation. To make matters worse, when the economy tanked around 2009, she says, participation in its 401(k) plan dropped from about 80 percent to 70 percent. People were worried and held on to their cash, says Kontje.
Since then, the company has bundled its underutilized financial programs and resources under a new brand called Smart Saving and has been encouraging DIYers to take advantage of them. Employees simply log on to the company's intranet and click on the Smart Saving link on the home page to access information about dozens of financial resources and programs ranging from financial planners to retirement workshops.
In addition, AmEx presents annual, on-site financial fairs and quarterly, virtual financial fairs with live chat sessions that promote the value of financial experts to workers -- which, in turn, drives behavior change. Two years ago, it also began offering special sessions for different employee networks. For example, one workshop within its Parent Network addressed expenses parents need to think about when having a baby.
One more example: Every year, employees are encouraged to participate in the 1 percent challenge that coincides with America Saves Week, observed in February. On the company's blog, DIYers and others share tips on how they save 1 percent of their annual income, such as skipping gourmet coffee once a week.
"This is a journey for all of us," Kontje says, adding that, since 2009, 401(k) participation has risen to 84 percent and the average savings rate grew from 7.2 percent in 2009 to almost 7.9 percent this year. "As a company, we want our members to have great tools and resources and manage their money wisely. It's good for them and good for us."