The financial condition of the lower, middle and upper middle class has slipped lately as evidenced by climbing home foreclosure rates. In reality there has been a negative trend for decades: The average savings rate continues its decline, reaching a new low – the worst since the Great Depression in 1933, and household debt has been growing steadily and is up 80 percent compared to 1990 (inflation adjusted).
Will the fee-only financial planning industry come to the rescue? Don't hold your breath; they continue to pursue only the top 5 percent wealthiest people, leaving the other 95 percent underserved. In fact, less than 3 percent of 108 million middle- and upper-income households are served by accredited financial planners, according to the May edition of The Journal of Financial Planning. They concluded that people who really need financial counsel can't afford the services of financial planners.
The workplace is where most people receive the greatest percentage of their financial services, so you could say that employee benefits consultants are America's de facto financial planners. Consider that the workplace is where most people have their greatest amount of insurance protection: life, disability and health. Secondly, it is where people have the largest source of their retirement funding. Health savings accounts and Section 125 plans provide a whole host of other benefits.
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In addition, many employers have credit unions offering everything from checking accounts and loans to investments. However, weak participation in voluntary pension contributions and elective benefits, such as additional life and disability insurance, leaves many people unprepared for retirement and underinsured.
Workplace financial education and planning services, when provided to employees, can help many workers get their financial lives pointed back in the correct direction. Employers have many options today, most of which can be delivered efficiently and inexpensively. Many employers are offering expanded learning opportunities either with self-directed educational online modules or "lunch and learn" workshops taught by financial, tax, and legal professionals. However, unless the information is provided with a personalized comprehensive plan, much of the financial information won't be applied. Employers can now easily provide comprehensive financial plans via the net by software specifically designed for consumer interaction.
The payoff to companies and their employees is great; workplace financial education and planning will lead to increased participation in elective benefits, such as 401(k)s, voluntary disability and life insurance, and greater financial security. This is because for the first time people are provided with an overall plan that they can understand. People can make better financial decisions when they are more educated about financial matters. When people understand how financial principals apply to their personal situation, when they can see the numbers, suddenly the complex becomes clearer.
With greater financial security comes less financial stress, and happier and more productive employees. In addition, planning delivered in the workplace will provide increased opportunity for workplace marketing to those firms providing a wide range of benefits from payroll deduction plans to non-qualified deferred compensation. Companies and pension plan administrators have one more reason to applaud computerized workplace financial planning – complying with the requirements of the Pension Protection Act. The new law provides an exemption to ERISA's prohibited transaction rules for advice provided by a "fiduciary adviser" or a computerized model meeting certain criteria.
The convergence of new law, middle America's financial condition, and technology have created a ripe opportunity to deliver computerized workplace comprehensive financial planning.
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