Investment advice an employee bonus

LEADING companies win the talent war by taking a strategic approach to the design of their performance-and-rewards programs. It’s not just salaries that make the difference, but the composition of the total remuneration package; and one of the strongest trend lines is the growth of strategic financial advice as part of the HR value proposition.

Interestingly, the performance outcomes of large organisations reflect the benefits of this trend. In a global HR survey called ‘Creating People Advantage 2010’, 5,561 firms in 109 countries were grouped into performance quartiles based on revenue and profit over three years, with industry differences factored in.  

The stark difference between the top and bottom groups shows that high-performing companies rank ‘performance management and rewards’ as the second most important capability to have, whereas low-performing companies ranked it only ninth. 

Financial advice as an employee benefit is now recognised by many companies as an integral component of the HR value proposition. 

Management’s reasoning is founded in psychology. For many individuals the three most important aspects of life are family, work, and wealth. If the concern about wealth can be addressed, firms believe that the focus at work and the contentment with family increases substantially. 

The research confirms this reasoning. Among Fortune 500 companies, 62 per cent of US firms believe their responsibility (to employees) includes taking an interest in whether they are tracking toward a comfortable retirement, while 42 per cent of companies with more than 500 staff meet that responsibility by providing financial planning services (ie, individual investment advice).

Yet introducing these programs must be managed strategically and carefully. CEOs and HR managers can see very clearly the benefit for their organisation in having their employees’ personal wealth being managed strategically using independent advice, but how should it be introduced to the organisation to maximise the benefits?

The first step is the selection of executives and other staff. Which levels within the organisation are the most critical for the company’s performance? Which are most critical in regards to retaining the organisation’s IP?  

We have found that employees generally fall into three major areas in regard to the financial advice benefit: the executive team; the leadership group; and non-management staff.  Each group has different levels of financial advice appropriate for their situation, from a full-service arrangement, to a core advice service with the option of additional financial services, to a finance education benefit. 

The second step is selection of financial advisory service providers. Given the importance of advice in this area, most companies undertake a careful review of available options. There are many types of service providers in Australia, but many are linked to in-house products or offer only partial services. Only a minority of firms delivers full-service solutions that address the full range of clients’ financial complexities.

To be specific, full service strategic advice should cover all aspects of wealth management – cash flow planning, tax planning, financial entity structuring, superannuation, SMSF accounting, retirement planning, investments, personal insurance, debt strategy, estate planning, aged care, and philanthropy.

The third step is employee engagement. We find rapid take-up from employees with ‘burning issues’ that need resolution, but engagement beyond this group can be patchy. There are generally three reasons: some may already have advisers; they assume that advice is a veneer to shift in-house products; or they assume that advice is limited to investments (and they have nothing to invest). 

Many leading firms address this issue in two ways:

• they establish an effective communication program – when employees understand the value of independent strategic advice focused on all aspects of financial well-being they find most of their concerns are addressed; and

• they engage the spouse in the financial discussion – not only does this additional perspective add depth of understanding when talking about what money means to a particular couple by identifying personal financial goals of both parties, it also brings the employee’s spouse closer to the company and significantly elevates its reputation. 

With financial advice benefits in place, HR managers can further align the interests of the company with the employee by treating financial wellbeing as one would a general health check. Ensuring the employee formally reviews the financial strategy once a year goes a long way to providing a measure of relief that in this crucial aspect of a person’s life, a long-term plan is in place and progress towards financial goals is being measured.

Geoff Pritchard is CEO of Finovia, a strategic financial advisory firm. 

Contact Geoff on 08 9488 0200  | geoff.pritchard@finovia.com.au
www.finovia.com.au