Academic journal article Financial Services Review

The Corporate Market for Personal Financial Planning Services Benefits

Academic journal article Financial Services Review

The Corporate Market for Personal Financial Planning Services Benefits

Article excerpt

Abstract

The corporate market provides a tremendous opportunity for the delivery of personal financial planning services, yet little is known about the workings of this market. This study develops insights into the corporate market for personal financial planning services benefits and explores opportunities for future research into this market. The results provide new insights into the nature and scope of the market for personal financial planning benefits at large corporations. However, there is room for much additional research into this market on both theoretical and empirical levels. © 2003 Academy of Financial Services. All rights reserved.

JEL classification; D14; G20; G30

Keywords: Personal financial planning; Employee benefits

1. Introduction

This study begins to develop insights into the corporate market for personal financial planning services benefits and explores opportunities for future research into this market. Though anecdotal evidence suggests that a corporate market for personal financial planning services benefits exists, there has been little research into the current state of the market and its future direction. We survey the chief human resources officers of the Fortune 500 companies to gather data on the characteristics of the corporate market and to begin an assessment of the viability of the market. The results, based on a sample of responding Fortune 500 companies, suggest that there is a viable corporate market for personal financial planning services benefits. This market provides considerable opportunity for financial planning professionals and for individuals seeking financial planning services, and provides opportunities to study an alternative delivery mechanism for personal planning services.

Recent trends and developments in the administration of employee benefits have placed increased responsibility on employees to manage their retirement plans. The major shift from defined benefit to defined contribution pension plans has transferred much of the responsibility for asset allocation from employer to employee. In addition, as individuals invest more money in the stock market, employees are investing more of their personal savings in risky assets. The increased responsibility for employees to manage their own retirement accounts, coupled with the temptations of volatile financial markets and cheaper and easier online investing, brings with it a myriad of complex issues and tradeoffs that employees need to assess in order to maximize the potential for achieving their life goals. In response, employers offer employees varying degrees of assistance and training related to retirement planning and investment management and personal financial planning services.

Prior research suggests that employers pay a price for reduced employee productivity caused by stress related to personal financial mistakes. Garman et al. (1996) argue that the costs of reduced employee productivity because of poor personal financial behaviors are substantial. Garman (1999) argues that corporate financial education benefits can reduce employee stress and enhance productivity. He estimates that the potential savings for employers of the nation's 18 million clerical workers is $440 million per year. These results suggest that corporations can realize tremendous cost savings by providing personal financial education to employees. Garman et al. (1999) find that 91% of employees who participated in employer-sponsored personal financial planning workshops agreed that the education gave them the information that they wanted, and 90% were very satisfied with the education provided. Seventy-five percent of the participants report that they made better financial decisions after attending the workshop and were more confident in making investment decisions. Eighty percent of the employees desired additional workshops. Supervisors' performance ratings of employees were significantly correlated with the employees' financial wellness. …

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