The Tricky Line Between Financial Education and Financial Guidance

Employees want help with their financial affairs, and they don’t really care what you call it. But the line between financial guidance and financial education is an important one for employers, who may take on certain liabilities if seen as advising specific actions that later do not work out so well.

This is one of the obstacles to clear, actionable communications that workers overwhelmingly say they want from their employer. Yet nearly half of retirement-plan participants agree that the communications they receive about their 401(k) do nothing to help them make decisions, a BlackRock survey found. Most employees glaze over at the “dense, overwhelming and confusing” presentation of choices and other material, BlackRock found.

Countries and companies around the world are grappling with this communications issue as they increasingly take up the battle for financial literacy, and lean on the workplace to get it done. “The workplace is an important avenue to reach (adults) because it’s like the school system for children,” says Jane Rooney, financial literacy leader for the Financial Consumer Agency of Canada, which launched its National Strategy for Financial Literacy last year. “You’re reaching a whole cohort of workers with key information at the right time.”

Demand for financial literacy lessons in the workplace is increasing worldwide, and employers are responding. According to a recent global report by Xerox’ HR Services, 92% of employers said they offer retirement financial security and preparedness programs while 91% offer financial literacy and skills programs. These latter programs are the fastest growing: Less than half the programs have been around as long as two years.

Why such workplace momentum? The top reason: Financial education alleviates financial stress–and that makes for more focused employees. “People who are stressed are less productive, and they’re absent more,” notes Rooney.

Employers provide financial education in a number of ways: online courses, guest speakers at the office, outside lectures on the company website. These generally stop short of the kind of actionable advice that workers want. To provide that advice–and get around the liability problem–employers should bring in a vetted third-party adviser, says Frank Wiginton, CEO of Ontario-based Employee Financial Well-Being.

Workers generally trust their employer to do the right thing,  says Gary Rabbior, president of the Canadian Foundation of Economic Education. “One of the most important things around financial education and literacy is trust,” he says. “If people have any reason to be suspicious or question the motives, it really has a dramatic impact on peoples’ willingness to be involved.” Bringing in a third-party adviser helps build that trust–so long as costs are kept to a minimum and the adviser has a solid track record.

Posted in Adults on December, 2016