The War on Financial Illiteracy
Business Finance (06/02) Vol. 8, No. 6 p.45; Sammer, Joanne

Employees' 401(k) plans are overrun by company stock, but companies have been reluctant to offer investment advice, fearing retaliation for stock market losses. However, the recent buzz about employee financial illiteracy prompted many employers to implement financial planning and investment advice courses and seminars. The U.S. Department of Labor recently stated that it would consider not holding plan sponsors responsible for employee losses as long as the company chooses and reviews its financial advisor in terms of the Employee Retirement Income Security Act. A Virginia Tech National Institute for Personal Finance Employee Education survey revealed that 20 percent of employees spend time at work attending to personal financial matters and 20 percent are unable to carry out normal work activities three days per week due to financial concerns. Moreover, 25 percent want to receive training on budgeting, tax planning, and debt consolidation, while 75 percent would attend employer-sponsored financial checkup programs. Companies implementing such programs should be aware that the most successful meet organizational as well as employee needs, and can increase productivity and improve management skills. Employees' demographic and geographic needs should be taken into account, and focus groups can quickly pinpoint which areas need the most attention. Whether tying the program to 401(k) enrollment, debt consolidation, or other needs, employers should be aware that financial advisors that charge flat fees rather than commissions tend to be the most objective and motivated toward meeting program objectives.


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