With advice comes financial confidence

Personal advisors can help boost financial literacy of employees
By Greg Pollock
|Canadian HR Reporter|Last Updated: 10/10/2011

Uncertainty in the world markets has driven home the issue of financial security for employees. These days, it seems like you can’t turn on a radio, read a newspaper or surf the web for five minutes without being blasted with bad news.

As a result, employees may be asking, “How will what has happened impact me?” or “How much longer will I have to work to ensure the kind of retirement I had originally envisioned?”

HR professionals have an important role to play in calming employees’ fears and helping them achieve their financial goals. So too do professional financial advisors who can help add some sanity to a workplace when it comes to financial uncertainty.

So why is there a need for professional financial advice? First, there has been an evolution in workplaces away from defined benefit (DB) pension plans towards defined contribution (DC) plans. DB plans have both an upside and a downside for an employee while a DC plan, which gives an employee more flexibility in how the plan is administered, also requires greater employee oversight.

Next, at a time when more Canadians are moving into retirement and living longer, the financial services marketplace is having to change to accommodate these evolving needs. In many cases, this means offering more product choices.

While all of this can be advantageous to the consumer, the products are also becoming more complex. Financial advisors are always working to stay up to date on these product offerings.

Finally, employees’ financial problems will impact an employer’s bottom line. When employees are thinking about their debt — such as student loans, car payments or calls from creditors — they are not thinking about their productivity or workplace safety. They are more likely to suffer from hypertension, insomnia, anxiety or depression — and that means more sick days.

One-quarter of working adults routinely experience personal financial difficulties and that financial stress is frequently at the top of employees’ list of stressors, according to a 2005 report from Financial Literacy Partners in the United States.

And the cost of workplace financial stress can be high — a study by the American Institute of Stress pegged the cost in the United States at US$300 billion per year in the form of lost productivity, increased absenteeism, employee turnover and increased medical, legal and insurance costs.

This number has likely only gone up over the past few years as a result of economic turmoil.

Employees want and need help. Study after study shows, unequivocally, Canadians with professional financial advice are more confident about their financial future and better prepared.

To help, let’s start with HR professionals. Consider their personal level of financial literacy. Are they capable of assisting employees with their financial problems? If not, do they have the resources available or know where to get the resources?

If there is an employee assistance provider (EAP), is it prepared to effectively assist with financial issues? What about the benefits provider? Will it work with employees on personal financial issues?

Most financial advisors are more than willing to help HR help employees make smarter financial decisions by giving a presentation, a lunch-and-learn session or being a speaker at a staff meeting.

Most advisors can address a broad range of general topics, such as how much employees should be saving for retirement or how to reduce debt load. However, the more specialized or specific the issue or concern, the more background research is needed to find just the right advisor.

Trusting a financial advisor

If choosing to look for help from a professional financial advisor, there are a few things to know about the industry. First, it’s not the Wild West. One of the biggest misconceptions is financial advisors are not regulated — nothing could be further from the truth.

Financial advisors and planners in Canada are among the most heavily regulated in the financial services industry. This statement is supported by the fact there are more than 50 boards, commissions, agencies and self-regulating organizations overseeing their work.

Financial advisors who sell insurance, securities and mutual funds are regulated at the provincial level. Each province has an insurance act and an insurance regulator, as well as a securities act and securities regulator.

The sale of investment products is also regulated through two self-regulatory organizations — the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada. Both organizations are overseen by provincial securities regulators.

A financial advisor in Canada is also bound by regulations that require the consumer’s interests be paramount. And if the advisors hold advanced financial designations or belong to professional associations, advisors are committed to codes of professional conduct.

In most provinces, financial advice licensing requirements include ongoing professional development. If an advisor belongs to a professional association, she will also have mandatory, annual professional development.

Many financial advisors and planners in Canada are required to hold errors and omissions (E&O) insurance that protects the advisor and client against mistakes and allegations of mistakes. Financial advisors and planners are also committed to ensuring clients have the information they require to make informed choices.

As in any other profession, there is a line of demarcation between good financial advisors and not-so-good ones. It makes sense to consider advisors:

with advanced financial designations

who belong to a professional association

who have demonstrated a commitment to ongoing professional development

who have E&O insurance

who are appropriately licensed in their province.

Financial advisors are committed to improving the financial literacy of Canadians. Canadians who are active in their financial lives make for more successful — not to mention financially literate — employees. So reach out to them, help them to help you. Don’t just say you’ll help your employees but give them the tools that will make their success possible.

Greg Pollock is president and CEO of Toronto-based Advocis, the Financial Advisors Association of Canada. For more information, visit www.advocis.ca.

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