New services sweeten the pot for DC plan sponsors

By: Stephenie Overman

Aetna Retirement Services has upped the ante to other vendors in the competitive defined contribution services market by offering a series of free or low-cost financial planning seminars featuring “high touch” education.

Many financial service providers today are concentrating on the Internet, but “high touch works better in education,” according to Mark Willis, vice president of Aetna Financial Services.

“We get people involved in one-on-one education and it’s much easier to communicate in whatever their style is — whether they’re visual, audio or kinesthetic learners,” said Willis, who introduced the Financial Planning in the Workplace program to the participants of qualified plan sponsors.

Although Aetna does offer Internet services for self-starters, “adult learning works best with exercises that bring out personal experiences. I’m excited about that part of it; we’re getting through quite a bit more,” Willis says.

Priced to attract

With an employer’s permission, a registered financial planner from ARS or Aetna’s Financial Network Investors Corp. (FNIC) gives educational seminars to the client’s plan participants. The seminars cover risk tolerance, goal-setting and asset allocation. Specialized seminars focus on tax strategies, college funding, budgeting, and the special needs of women saving for retirement.

After a seminar the Aetna representative can provide each participant with a free “Financial Healthcheck.” The employee may choose to arrange for an in-depth one-on-one paid consultation.

“The service is priced to attract people who usually don’t have access to financial planners,” according to Willis.

Pilot programs were conducted about two years ago in Detroit and Texas. Now about 55% to 60% of individuals who attend the workplace seminars pursue the individual consultations.

“One of the things that makes this unique is that we have done a lot of work on the definition of education versus investment advice,” Willis says. “We provide the education in the workplace and then we have a well-thought-out approach if someone wants to move into the advice mode.”

That approach should protect both the plan sponsor and plan participants, he said. “It takes advantage of the safe harbor,” keeping the program in compliance with ERISA regulations.

Benefits managers appreciate the efficiency of the plan, Willis says. They also like the low cost. The turnkey program is bundled into the sponsor’s defined contribution plan at little or no extra charge.

“We sometimes package it as part of a product offering. Obviously, there’s a cost in terms of materials and in certain instances we do have a fee, mainly to cover expenses.”

With responsibility for retirement planning being pushed to the employee, “you need to give people better tools. This is geared to the typical employee. We’re getting everyone across the spectrum involved,” Willis reports.

Most 401(k) plans have discrimination testing that weighs the participation of the highest paid third of employees against the participation of the lower two thirds, Willis noted. “With this type of education you are recognizing the need to get much better education to the rank and file so people begin to do the right thing” with their 401(k) plans.

‘Notching up’

The program addresses employees who are not in the defined contribution plan at all; savers who are in the plan but are risk adverse; investors who have at least started to diversify into common stocks or bonds but don’t know their target; and, finally, true planners who have a retirement goal and know the amount of risk they need to reach to their goal.

“Our goal is just to get people notched up one level — to get the nonparticipator to become a saver or a saver to become an investor,” he explains. “But with the one-on-one mentoring you can take them all the way through the process, so they really know what they should be shooting for. By connecting education with the availability of advice, we help all those groups.”

Aetna acquired Financial Network Investment Corp., which has 2,400 individual representatives across the country. The planners are independent contractors, according to Willis. “We are trying to create a network of local planners who are highly trained and willing to do this to gain credibility, for example. They are not wed to Aetna products. In many cases, such as long-term care, there is no Aetna product on the shelf” that they can sell.

If a company is an Aetna customer, “we will come out and explain the plan. We will meet with the local supervisor of the plan. It’s a consultative process. We try to get at the important issues within the benefits department, such as discrimination testing problems, and address those issues in the education,” Willis says.

Eye toward empowerment

Analysts outside of Aetna introduce a note of caution. For example, Ken Decker, vice president of Decker and Associates Inc., Houston, Texas, joins those who “applaud all efforts to do financial education for employees.” But he reminds benefits managers that the goal of financial education programs should be to put power in the hands of the employee.

Too many programs “are dying to give information that makes it look so complex that people will feel they need to get help. From the employer point of view, you should be most interested in programs that teach employees how to create their own financial plans. They should teach them how to make investments from a quantitative point of view rather than based on emotional views of risk.”

The number of people who really need comprehensive financial planning help is small, according to Decker. “They may need to meet with people who have the technical knowledge to review their plans and offer a second opinion. But the time spent with a planner is very short and they are in control.”

From the company’s point of view, good financial education improves a worker’s productivity, Decker believes. “When people ask, ‘how do I become financially independent working for my company?’ they begin to understand the value of their employment and view it as a partnership. They understand that the corporation wants to make profits and that they want to become financially independent and that there is a link.

“An employee who can say, ‘I know what I can achieve and why I am here,’ looks at Monday differently and is less tolerant of other employees who are not inclined that way.” — EBN