FINANCE
willing to explore multiple avenues to help enable the best outcome for that
employee, increasing their goodwill. According to Ipsos Reid’s 2011 Value
of Financial Advice Study, folks who have the chance to meet with an advisor
regularly have up to four times more investable assets, save more regularly
for retirement and retain greater discipline during more volatile markets.
2. Take advantage of your plan provider’s different
service levels
A plan provider should offer guidance and value to all of the different employees
in your diverse organization – not just the owners, and not just the
newbies. This is where that one-size, cookie-cutter approach is not recommended.
Booklets and websites may help get employees to opt into a plan
(even that is debatable), but human beings are typically needed to properly
guide a person’s financial journey. Someone who is just starting their savings
journey will require a tailored conversation that possibly incorporates other
financial concerns, such as debt and budgeting. Whereas someone who is
nearing retirement may need more income planning information that warrants
a different advisor trained in those financial areas. And it seems every
company has that select group of employees who – for any number of reasons
– know more about investing than you do.
Finding the right fit for financial advice isn’t always about the amount of
an employee’s income, or the hypothetical colour of their collar. Your service
provider needs to have the resources and diversity in their staff to handle all
of your different employees. And don’t shy away from offering that higher
level of service to your key employees who may have more complex needs –
the numbers are only part of their retirement picture. As an employer, taking
advantage of a comprehensive, full-service approach won’t cost extra, but has
meaningful benefits for your employees.
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BENEATH
THE SURFACE
BEHIND
THE SCENES
3. Get SMarT
We frequently ask companies, “Are your employees saving enough for retirement?”
It’s a trick question: almost always, they aren’t. Most of us aren’t.
The easiest way to change that is to offer them an out-of-this-world match
on their contributions, enticing them to save more. But who can afford to do
that in 2020 and stay competitive (or heck, keep the doors open)? The good
news: there is a way to encourage employees to save more and achieve a better
funded retirement, without costing you a penny.
The concept is called “Save More Tomorrow” (SMarT) and was developed
by behavioral economics researchers in the U.S., Shlomo Benartzi and
Richard Thaler. To summarize their research, knowing that folks are hardwired
to make decisions in a certain way that doesn’t necessarily drive the
best retirement outcome, Benartzi and Thaler created a type of SMarT savings
plan, where employees were able to opt into a program that allowed
them to split their future cost-of-living raises in half, putting half to work in
the company retirement savings plan (passively increasing their contributions
annually), and taking the other half as a pay increase (so their pay would
never decrease).
A Regina employer implemented just this type of plan. Of the staff who
were offered the program, 40 per cent accepted and zero opted out after the
first annual pay increase – resulting in a large number of employees automatically
increasing their retirement savings while feeling none of the pain and
costing the company nothing extra in the end. The research also shows that
blue collar folks are likely to get more out of a program like this and stay opted
in for the long haul, increasing their retirement savings rates by up to triple
the amount.
You as a company can offer this simple SMarT solution to help your employees
get around the hardwiring, and it’s also applicable to those who think
their plan is doing “just fine” right now. A simple but brilliant way to kickstart
growth of an otherwise average plan and realize better outcomes.
Paul Forer, B. Comm., is a vice-president, portfolio manager and investment advisor
at RBC Dominion Securities. This information is not investment advice and
should be used only in conjunction with a discussion with your RBC Dominion
Securities Inc. investment advisor. This will ensure that your own circumstances
have been considered properly and that action is taken on the latest available
information. The strategies and advice in this report are provided for general
guidance. Readers should consult their own investment advisor when planning to
implement a strategy. Interest rates, market conditions, special offers, tax rulings
and other investment factors are subject to change. The information contained
herein has been obtained from sources believed to be reliable at the time obtained
but neither RBC Dominion Securities Inc. nor its employees, agents or information
suppliers can guarantee its accuracy or completeness. This report is not and under
no circumstances is to be construed as an offer to sell or the solicitation of an offer
to buy any securities. This report is furnished on the basis and understanding that
neither RBC Dominion Securities Inc. nor its employees, agents or information
suppliers is to be under any responsibility or liability whatsoever in respect
thereof. The inventories of RBC Dominion Securities Inc. may from time to
time include securities mentioned herein. RBC Dominion Securities Inc.* and
Royal Bank of Canada are separate corporate entities which are affiliated.
*Member – Canadian Investor Protection Fund. RBC Dominion Securities
Inc. is a member company of RBC Wealth Management, a business segment
of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada.
Used under licence. © 2020 RBC Dominion Securities Inc. All rights reserved.
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