YOUNGSTOWN, Ohio – In the competition for talent that virtually every business finds itself in, making long-term investments in employees can be a strategy that sets its company apart. Helping employees, whether current workers or potential hires, plan for their retirement shows them a long-term commitment.
“The first thing I’d ask myself as a business owner is how important employee retention is to me. Is it crucial to the type of business I’m in? Is it important to the end clientele to have that kind of consistency in my employees?” says Stephen VanSuch, financial adviser at the Canfield office of Merrill Lynch. “If I’m the owner, do I want to help build a nest egg for my family as well? If those answers are yes, then a retirement plan is an optimal start.”
When offering such plans, the company bears some fiduciary responsibility, although professional advisers like VanSuch can help to bear some of it.
“We can’t completely eradicate their responsibilities, but we can help them make sure they’re doing the right things in terms of investments, education and regulatory requirements,” says Mark Wenick, chief wealth management officer of Farmers Trust Co., Canfield. “Even though they’re never off the hook 100%, we’re there to share the burden and share our expertise so they can meet their obligations.”
Working with an adviser allows business leaders to tap into a deep well of expertise, benefiting both the plan participants and the company. At Farmers, that can mean tapping into record-keeping, lending and other forms of financial planning, Wenick says, while retirement planners can often refer clients to other advisers should there be questions outside their expertise.
“A lot of companies use 401(k)s, which also have other people involved whose job is to ensure that everyone is abiding by plan rules. Ultimately, though, it’s up to the employer to make sure everything is kosher,” says Jean Daley, a financial adviser at W3 Wealth Management in Warren.
With the tumult of 2020, now is a good time for companies to review their plans, says Patrick Russo of Daprile Financial in Canfield. Although the markets have rebounded and investors who didn’t back out of their long-term plans are generally in good shape, it can still be beneficial to examine the intricacies of an employer-sponsored plan.
“I’ve called on several businesses recently and discovered that they don’t have the best funds. They don’t have the cheapest or the best-performing ones,” he says. “Things like that are very simple fixes that you can make through your current provider. Now more than ever, you need to have a good relationship with your adviser and the company managing your 401(k) plan.”
Once a plan is in place, it’s up to employers – in conjunction with their advisers – to decide on what options participants can choose from. The step is important because of companies’ fiduciary responsibilities, Daley says.
“If they have a wide open platform where employees can pick up a crazy volatile stock, you don’t want to allow for something like that,” she says.
For employees who already have portfolios of their own, company plans can be merged or kept separate from personal plans. The decision is unique to each person and his goals.
“People have personal savings. If you have kids, there may be education savings. There may be savings to buy a house. All of those should sync up,” Wenick says.
For businesses that offer their employees retirement plans, one of the most crucial aspects is educating them on what’s available and how they can take advantage. In her experience, Daley notes that matching contributions often encourages workers to use their 401(k)s rather than letting them sit idle.
At the Canfield Merrill Lynch office, VanSuch observes two of the most common issues are that employees either don’t use their account or draw from it too early.
“My opinion is that retirement plans are still incredibly under-utilized by recipients. Most folks that are eligible to participate in that 401(k) plan don’t,” he says. “The other part is … people don’t always understand that the stock market has returned 10% in modern history. In order to accomplish that historical rate of return, you need to extend your time horizon.”