Portals Offer Gateway to Financial Education

By Drew Robb Aug 1, 2005
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HR Magazine, August 2005 More companies are using portals to offer financial education to their employees.

President George W. Bush traveled the country earlier this year, trying to sell the public on his plan to give employees more control over their retirement money. While economists and politicians differ on just how drastically the Social Security system should be reformed, many agree that employees don’t do a good enough job of planning for retirement.

“There is a growing consensus that employees are not saving enough or accounting for all their different [financial] needs at retirement time,” says George Thomas, principal at Mercer Human Resource Consulting in New York. “It is a surprise to a lot of employees that, depending on how long they live, they may run out of funds.”

Today, many companies are taking the initiative to educate their employees on personal financial options. Some are adding personal financial information and tools to their employee self-help intranet portals. These additions go beyond simply explaining the features of a company’s benefits program to providing tools employees can use to assess their own financial situation and develop strategies based on their priorities, whether that includes planning for college tuition costs, major medical expenses or retirement.

“Traditionally, what employers have done is focus in on benefits and making sure employees are aware of them and appreciate them,” says Thomas. “Now companies are taking a different approach in that they want to use information to equip employees to make the right decisions going forward. It is the employer being a bit more responsible.”

Between starting work later and living longer, most people, on average, will spend about half their life in the workforce. That means that for each year worked, they need to make enough money to pay for a year not working, whether their financial goal is retirement or supporting their children through college. Compared to earlier generations, many employees today would like a fuller, more active retirement—which means needing more money.

A Customized View

To help employees more accurately calculate how much money they will need in retirement, and make the best investment choices to reach that goal, companies are investing in financial portals such as the one created by consulting firm KPMG’s Acumen technology practice.

“Over the past 15 years, primarily as an outgrowth of 401(k)s, the financial services industry has increasingly provided services directly to employees on behalf of employers,” says Acumen’s National Director R. T. Whitman, who is based in Short Hills, N.J. “We built on our expertise working with financial services firms to build tools that employers can use directly.”

The KPMG/Acumen portal is targeted primarily to larger companies, although it can be scaled down, at an average cost of $3 to $6 per employee per year. The software and content reside on KPMG’s servers and are linked to customers’ internal employee sites. Customers choose the features they want to include, and KPMG brands the portal to match the rest of the company’s intranet. The portals contain information applicable to all employees, such as the company’s benefits package, as well as general financial educational materials and KPMG financial and market research reports.

“In these times where health care costs are rising and benefits are being cut, it is nice to be able to point to the positive things that an employer can provide to its workforce,” says Tresia Franklin, principal of MyHROnline, an employee self-help portal firm in Kansas City, Mo., who not only uses KPMG’s portal for her personal finances but also includes it in the services that the company offers its clients and employees. “It sends the message that retirement planning and financial planning are important.”

KPMG’s portal is designed to generate customized information and reports for each employee. It starts with each employee filling out a 40-question quiz, which includes information about salary, assets, expenses, income and children’s ages, to assess the employee’s financial needs and investment risk tolerance.

The employee can then go to a financial education center to generate customized reports either on their overall financial condition or on any of 10 specific life events. The overview report, for example, covers topics such as how many months the employee could live off current liquid reserves, the total amount of monthly salary needed to pay off debts (including mortgage), the percentage of an employee’s salary that would be replaced by insurance in the event of disability, and estate and retirement planning.

Each category compares the employee’s existing assets and liabilities against benchmarks or personal goals. At the end, the tool generates a set of action items.

Employees also have the option of uploading personal documents such as insurance policies, mortgages, wills or powers of attorney to their personal document library on the site.

“It is a resource that gives insights [and] suggestions for handling estate planning and, in everyday language, provides an explanation of what I should know,” says Franklin, who used it to generate her estate plan. “The other advantage is I can print it off and include the information with my other important papers for reference by family members.”

Expanding Options, Access

Another option companies have for providing financial education to employees is to use the features built into their existing human resource management system or enterprise resource planning system. SAP, a business applications software company based in Germany, for example, has features in its employee self-service portal for changing personal data, entering time worked, printing out pay slips, enrolling for company benefits and scheduling vacations. It also comes with three preconfigured life events pages that allow employees to follow a series of steps related to each activity—marriage, divorce, and birth or adoption of a child. Users can add their own events to supplement these scenarios.

Human capital management services firm Gevity HR Inc. of Bradenton, Fla., uses a platform from Redwood Shores, Calif.-based software company Oracle to provide HR self-help to its 1,000 employees as well as to another 175,000 of its customers’ staff. Some tools are built into its portal, but it also has links to benefits providers’ sites for more sophisticated modeling.

“We have some benefits calculators, such as how it would affect your taxes if you took out $3,000 pretax and put it into your flexible spending account,” says Mark Zimmerman, Gevity’s vice president of information technology. “Then you have access through the 401(k) provider to financial modeling tools for retirement savings, planning for college and so forth.”

The Retire@Ease Planner, a tool offered by consulting firm Mercer, allows employees to model their income and expenses to predict when their resources will run out. It can be customized to meet a particular organization’s needs. In addition to accessing basic financial information, employees can plug in their expected income sources, expenses, retirement date and other data to create a graph showing their anticipated income. They also can model different scenarios and, based on prompts, receive suggestions designed to improve their financial outcome.

Banks, benefits providers and financial services firms also offer tools, such as online account access, that are tailored to their services. These tools can be linked into an employee portal, but, unlike the services provided by financial institutions, they may not provide real-time account data.

Despite the benefits they offer, some employers worry that access to these tools can be a distraction if employees spend too much work time managing their investment portfolios. Others take the position that employees who are concerned about the status of their finances don’t perform as well as those who aren’t, and they argue that employees already spend time on the office phone or Internet handling these matters anyway. In response, some employers offer financial information over an extranet so employees can access it from home.

“We see more and more of this information pushed out onto corporate extranets,” says Thomas. “This, like all other aspects of total rewards, is part of family decision-making, and employees prefer to go home and do these projections together with their families.”

Drew Robb is a California-based freelance writer who specializes in technology, engineering and business.

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