Financial Finesse announced Tuesday the release of its 2010 Year in Review report, which found employees have improved in all areas of financial planning.

Still, 32% of employees said they had "high" or "overwhelming" levels of stress, down only one percentage point from 2009.

"We're still feeling the lingering effects of the recession. We may technically be in a recovery, but the recession set us back" Liz Davidson, CEO of Financial Finesse, told AdvisorOne. "Some of those people may have a spouse who lost a job, or they're having trouble paying their mortgage. Their net worth is down, and it's an improvement over last year, but it's still low."

More than half of calls to the company's financial help hotline were about long-term planning issues, up from 43% in 2009. Calls regarding retirement increased from 15% in 2009 to 24% in 2010. Debt-related calls fell from 21% to 16%. Cash management calls fell, though not as much, dropping to 14% from 17% in 2009.

Just 17% of employees report being on track for retirement, though, despite 83% of employees saying they contribute to their retirement plans at work.

"That's employees across the board," Davidson said. "One of two things happened; either they ran retirement calculations and discovered they're not on track, of they haven't run them at all and know the news is going to be bad."

While 88% of men say they contribute to their employer-sponsored plans, just 27% say they are on target to replace at least 80% of their income once they retire. Among women, 83% contribute to their work retirement plans, but just 13% say they are on track for retirement.

"Increasing contributions is the number one thing to do," according to Davidson. "In 2009, employers reduced or eliminated their match. That coupled with employees struggling to make ends meet, it seemed logical to take hardship withdrawals or reduce contributions. The irony is in those situations you need to save more. You can't control the market, but you can control how much you save."

"Employees reacted emotionally, rather than objectively," she added

Davidson also pointed to inappropriate asset allocations as a problem. Employees with portfolios overweight in equities try to take advantage of improvements in the market and they're buying when prices are high; when things change and they start to panic, their allocation goes to stable value.

"That behavior is common among 401(k) participants," Davidson said.

For advisors, it's important to focus on education clients to prepare them for retirement; whether that's with online content, or outsourcing to a company with a good curriculum, advisors need to get their clients to make changes, Davidson said.

"If you have an ongoing relationship where you're held accountable you must show progress in order to continue that relationship. Now is the time to invest in education with clients who aren't where you want them to be, knowing that they're your pipeline for the future."

The report indicated signs of recovery were evident as early as the fourth quarter of 2009. Eighty-two percent of employees say they pay their bills on time each month, compared with 78% who said the same in 2009. Over half of employees said they pay off their credit card balances in full, up from 44% in 2009. Forty-eight percent say they have an emergency cash fund and 64% say they "have a handle of cash flow."

The report identified the top five questions employees asked when calling the helpline:

  1. How much do I need to retire and how much should I be saving?
  2. How do I choose the right investments in my retirement plan?
  3. What strategies will help me reduce my debts?
  4. How do I put together a budget?
  5. I am having trouble making ends meet, what can I do?

Half of respondents said they have a "general knowledge" of stocks, bonds and mutual funds. Nearly three-quarters of men and 40% of women said they understood these products. Retirement planning was the top priority for employees, followed by money management, debt management, taxes, investing, estate planning and insurance.

The report noted that employees "continue to focus too much on saving taxes and not enough on investing." The company attributed that behavior in part to "an improving stock market and a general lack of knowledge about taxes," but warned that "if the stock market continues to do well, investors may once again by lulled into a state of complacency, putting them at risk of allowing their portfolio to exceed their risk tolerance."