What’s Missing in Client Plans: Employee Benefits

We specialize in helping employees use and understand their benefits in the workplace but it doesn’t end there—employees need more guidance outside of work when mapping out their financial plans. For example, before Erik Carter joined our team of resident financial planners two years ago, he used to review every single one of his clients’ benefits with their employers.  His belief was that by doing so he could ensure the best, well-rounded financial plan for his clients possible.

Here are three areas you should look at in your clients’ benefits package:

1. Weak Retirement Benefits. Erik told me that first identifying what was weak in his clients’ employer-sponsored plans made his job easier. Doing this would help him determine what their current portfolio was lacking since they most likely have a plan in place with limited investing options. If the plan has a weak international stock fund, for example, consider advising your client to invest internationally outside of the plan. In addition, determine what alternatives you should consider that might be a fit for your client but are not available through a company 401(k), such as real estate investments, gold or commodities. Finally, look at the whole picture—if the client doesn’t have a large pension, they may need to invest more conservatively than those with a cushion, which can allow them to invest more aggressively.
    
2. Tax Efficiency. Of course, the advantage of a 401(k) plan is the tax savings. However, many people don’t realize that planning for tax efficiency is more than just contributing to their retirement account. You can advise them to hold more tax-inefficient investments like stable value funds, bonds  and high turnover mutual funds in their 401(k) and use taxable accounts for more tax efficient investments like index funds, ETFs, and individual stocks.
    
3. Insurance Benefits. These might be offered to employees at work, but they might not be taking full advantage of their life and disability insurance benefits. More often, employees think that they’re sufficiently covered by a life insurance policy equal to only their annual salary, when they may actually need at least seven times that amount. Even if they have enough insurance, they could become uninsurable after leaving their employer. Advisors can help their clients determine if they have these benefits available, if they need more coverage, and whether they should purchase additional insurance through their employer or on the individual market.

If you work in an area that has any particularly large employers, you may want to consider niche marketing and specialize in those employers’ benefits. You can use this as a way to differentiate yourself, showing prospects that you know their benefits and how to incorporate them into their financial plans. This can become a powerful strategy that helps you market yourself to employees who want to work with an advisor and obtain referrals to their coworkers. As the focus remains on how advisors are working with their clients, you’ll want to be ahead of the curve, not behind it.