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Financial Planning > Tax Planning

What’s Missing in Client Plans: Employee Benefits

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A while back, I wrote about how increasing competition in the financial planning profession has prompted advisors to look at unconventional ways they could set themselves apart. As a result of clients no longer accepting a ‘cookie-cutter’ model for planning, many advisors are providing more personalized guidance, digging deeper into their clients’ plans to help them achieve emotional and financial success. But there is still one area that has traditionally been ignored and is now coming to light as an important piece to being able to differentiate oneself from others in the field—employer-sponsored benefits.

Why this is important is somewhat obvious. For most clients who are employed, the benefits they receive during their career make up a huge portion of their savings and ability to achieve financial goals. We’re not talking just retirement plans, but also health care and insurance policies that help people pay for expensive emergency or medical bills, college tuition reimbursement benefits, legal benefits to draft estate planning documents at no or low cost and so on. These benefits are a big part of people’s lives and their ability to achieve their goals. There’s an inherent relationship between them and planning one’s future, and advisors are taking note.

As a workplace financial education provider, we repeatedly hear how much employees desire planning around their benefits. Their questions to our financial educators are often benefits-specific and there’s a reason for this. Many employers, though they are doing a better job overall at communicating benefits to employees, are not doing enough around the financial aspect that employees really care about—how their benefits help them achieve financial goals.

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.


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