Selling the Value of Employee Financial Education to Management

Speeches

Selling the Value of Employee Financial Education to Management, 1999, Personal Finance Employee Education Conference, Blacksburg, Virginia, Arnone

William J. Arnone[1] Ernst & Young LLP Presented at Personal Finance Employee Education Conference: Best Practices and Collaboration November 10, 1999 I don't think in my presentation today I am going to be telling you much that you don't already know. What I hope you will get out of it is a better understanding of the range of different value propositions that we can use in selling employee financial education and counseling programs to a company's management. By management I mean senior management, as well as HR management. How can we can look at the drivers of employee financial education more comprehensively and avoid the temptation to pin our sales opportunity on the same few value propositions in every situation?

I'm often asked, even within our firm: "What's the business case for employee financial education?" And my answer is always the same: there is no such thing as THE business case. Each company has different drivers, different levers you have to pull. What you need to know are all the possible business cases and then begin to look at which ones resonate with different companies. I don't want to give any one the sense that there is a silver bullet out there waiting to be discovered. I think that type of thinking is going to cost you in terms of your success, whether you are a provider who is selling to external companies, or internal folks who are trying to sell within your own firms. With that as the background, I'd like to look at the following issues.

ISSUES

First of all, just what does an effective employee financial education and counseling program do? Some of us are so involved in the mission that I don't think we often express what a program does in ways that get other people excited. I am going to offer my definition of what I think an effective program does.

Next, what are the value propositions to deploy in selling a program to buyers? How will a program be best positioned for success at a particular company and who will be the sponsor of the program at the highest level possible? What are the different levels of sponsorship? Who will be the champion? Who is the person who - it's become a cliché now - goes home every night and this is one of his or her last thoughts and wakes up in the morning and this is one of his or her first thoughts? Who is the champion at a company who will live and breathe employee financial education? Having a passionate champion within a company is the critical success factor in many of the clients with whom we work.

At Ernst & Young, we have been privileged to work with mostly Fortune 500 companies. In the most successful programs, you can always point to at least one champion at the organization who owns the program and who treats it, nurtures it, expands it, enhances it, and is evaluated on its effectiveness. You will have success when an employee financial education program is truly owned by someone who really believes in it.

Finally, I will offer some tips, some quick do's and don'ts, that I think might be helpful to you.

I would like to make this as interactive as possible, so instead of holding back on questions, I would rather have questions throughout. I'll also try to get your reaction to each of the value propositions.

For each value proposition, I'll ask you: Do you think it's a high impact proposition and do you think it's a high likelihood proposition? I think you are going to find that getting one value proposition that meets both tests is the challenge. Typically, the high impact ones are the low likelihood ones, and conversely the high likelihood ones are the low impact ones. The holy grail here is finding the high impact, high likelihood value proposition for each client.

EFFECTIVE EMPLOYEE FINANCIAL EDUCATION & COUNSELING

So, with all that said, let me offer a definition of what I think effective employee financial education and counseling is. By the way, I use the word "counseling" to kind of skate past the debate of "advice" or not "advice." I would like to say a few more things about that, because I think there may be a mischaracterization of the "advice" debate that is generating more heat than light. The definition of employee financial education and counseling that I would use is: to help employees develop skills to make informed choices and take action to improve their financial well-being. Each word in this mission statement is selected with care.

Help employees develop skills to make informed choices and take action to improve their financial well-being The first phrase is help employees. We really are in the business of helping people. I'm amazed at how many people I have spoken to at this Conference who come from social services backgrounds. Business is a new station in your career, but many of you have come out of a helping profession in your first real positions. I don't think that's accidental. If you have ended up in this position because you are mostly motivated by a real desire to help people -- and despite all the focus on dollars and cents, which I'm going to show is still important --there is something about a genuinely caring approach that still has merit even in corporate America. Many decision makers do value that. So you don't want to lose that.

The next key term is to help employees develop skills, which to me is a crucial distinction.

One approach to financial planning is to give employees access to a financial wizard who has all the answers. Employees can bask in the presence of this wizard, and then they leave and are as dependent as they were when they started out in the program. I think the key selling point here is developing a level of employee self-reliance, skills that people have that they can then use on their own, without being dependent on the so-called expert to tell them everything.

Next, with those skills, what do employees do? They make choices and more and more employees are being required to make significant financial choices. How are they doing?

If you look at the overall distribution of 401(k) plan assets and you compare it to the distribution of defined benefit plan assets, you are going to find that the two pretty much mirror each other. Therefore, let's not underestimate what impact employee financial education has had. Rank-and-file employees one way or another have gotten into a pretty good asset mix. The real question is: have they gotten there on an informed basis? Are employees where they are now by accident, by luck, or by self-conscious design. An effective financial education program not only instills decision making, but ensures that decision making is on an informed basis, where the employee can state the basis, the employee knows the basis and the basis is not "I did this because Bill Sharpe's black box told me this is what I should do." I don't think any of us would be comfortable with the latter as the basis for financial decision making.

I don't say that as a knock on Financial Engines. At Ernst & Young, we aligned early on with Financial Engines. There's a real need for participant investment advisors, but even a group like that, whether it is Financial Engines, 401K Forum/mPower, or Morningstar, I think you still need informed choice as the basis of employee decision making, or, as I will suggest later, I think the true litigation risk is from ill-informed choice or from uninformed choice.

Next, as a result of those choices, you want employees to do something, take action, action that is measurable. This is where Tom Garman and his Institute for Personal Employee Finance Education come in, to really focus on what did someone do differently as a result of this program that they would not have done before.

And then the ultimate test is that the actions people take will have a beneficial effect on their financial well-being. We can only hope that this will be the lasting result.

In the last five years, more people have a higher degree of financial security and likelihood of reaching their goals than was the case five years ago in corporate America. Most employees of large companies have made progress, and are more likely to reach their goals. Although progress has been made, there is still a looming crisis in the retirement readiness of the baby boom generation. So, we still have a way to go before we can confidently state that, at the end of the day, we will have succeeded in helping most people improve their financial well-being.

That is the overall definition of the employee financial education mission. There are four components of how you go about providing education that are important.

Inform with Accuracy

Number one in any program -- for those of you who are providers or for those of you who are buyers -- the minimal is a program that informs people with accuracy. Being in this business for twenty years, I am not as upset at what employees don't know as I am at what employees know with 100% conviction that is absolutely false. You see this anytime you conduct a workshop or you are on a telephone counseling line. Employees often say: "This is how my pension works, I know this is how it works because that's how everyone says it works." And, of course, that's not how it works. Many employees have been subjected to massive amounts of misinformation or they have misinterpreted correct data. So, at the very least, a good education program dispels myths. If that's all your program does, you have an "OK program."

Educate with Insight

I think you then have to go to the next level, which is to educate people by giving them insights, letting them know how they can take a set of facts, deal with them intelligently, and that when new facts come along, they have a framework and a method of decision making. Learning this process can then help individuals take new facts, sort them out and be able to apply them to their personal financial situation. So, your program gives participants insights, so they can then feel more confident that they can handle new information. Once you get to this level, I think you have a program that is better than most.

Motivate with Inspiration

You can go further though. The third element is to motivate people with inspiration, so that they leave each encounter with your program -- whether it's interacting on a Web site, calling a helpline, having a one-on-one counseling session, reading a publication, attending a workshop -- motivated. Participants feel they can actually do something and will in fact do something. They feel good about what they can do and you've reduced the procrastination.

Entertain with Drama

And if you want to go for what I think is the icing on the cake, it is to entertain with drama. Here, especially when you are looking at Generation X (although I hate that label, that seems to be the label that has caught on. I don't know what the next generation is going to be called. I have heard Generation Y, I've heard the Net Generation. We should probably just ask them what they want to be called) the entertainment factor is critical. There should be a sense that this is fun. Financial planning is something I want to enjoy. I don't want to consider it a drudgery.

If you get to these four levels, you will have a world-class program. More and more, this is what buyers seem to be looking for: really world-class programs that differentiate themselves from the masses of providers doing this throughout the country.

THE VALUE PROPOSITION

What is the value proposition for employee financial education? I am going to offer you six categories of value propositions. I think that all of them have merit, but they will be received differently by different companies. After each one, I'll just want to get your sense on two questions:

How high do you think the impact is?
How high do you think the likelihood is?

Legal

Value of Proposition Number One is the legal argument (and here I have to confess to being an attorney, so I have an inbred concern for legal issues, but I will contend that this concern is pervasive in corporate America). There are two aspects of the legal value proposition. In other words, what are the legal reasons for providing financial education to all employees of a company?

Fulfill fiduciary responsibility as plan sponsor

First is the notion that, under the Employee Retirement Income Security Act (ERISA), the employer is a plan sponsor and that brings with it fiduciary responsibility. The problem is that ERISA was written in a world of defined benefit plans. It was not written in a world of defined contribution plans. ERISA was enacted in 1974. 401(k) plans really did not reach any degree of acceptance until the early '80's. Neither the Department of Labor nor Congress nor the federal courts have given clear enough guidance to employers.

What does it mean to be a fiduciary in a defined contribution world, which is essentially different from a defined benefit world, because the assets in a defined contribution world are owned by the participants? In a defined benefit world, the assets are owned by the employer. So the thought here is that the employer is even more of a fiduciary in some sense when the employer is taking employee money that employees own and deploying it in the universe of 401(k) investments.

The courts are going to start defining this responsibility. In fact, if you want one case to watch, it's the case now involving First Union and Signet Bank. You know the expression that bad cases make bad law. This has the risk of being a bad case that makes bad law, but follow it carefully. It's a case where First Union Bank acquired Signet. First Union then had all of the Signet 401(k) plan participants move into the First Union 401(k) plan, whose investment options did not mirror the investment options that Signet offered. As a result, employees looked at what they were getting, and have alleged that on two levels they did not feel they were treated solely with their interests in mind.

The plaintiffs allege that the expenses of the First Union funds were excessively high and that the performance of the funds was not as good as the Signet 401(k) funds. So what the employees have done, and what is the beginning of a potentially massive class action suit, is to sue First Union and Signet, contending that they have abrogated their fiduciary responsibility. They are in effect saying: "Look at what we would have had in our 401(k)s if a) the expense ratios were less and b) we had been able to remain in the funds that we were in, which outperformed the comparable funds at First Union, and, in view of what have we lost in terms of returns over the last X years, restore us to where we would have been." This is the legal nightmare every employer faces when employees end up with less than they expected. You can hear the refrain: "Mr. Employer, we want you to make up the difference between what we now have and what we should have had, because our retirement security is dependent on it." So, I would watch this case very carefully to see the outcome. The risks in a case like this, from a plan sponsor perspective, is that the federal court decides to use this case to expand on a whole theory of fiduciary responsibility that is cumbersome. That is one of the risks when the federal courts, who are the ultimate arbiters of ERISA, start getting into the act.

On the other hand, the positive side is that the federal court decides that there is a gap in fiduciary guidelines and fills that gap in a way that is not burdensome. Then, I think plan sponsors are going to breathe a sigh of relief. Plan sponsors will then know more precisely what they have to do to avoid exposure in this area. So I would encourage all of you to really watch the First Union case as it winds its way through federal courts.

Prevent successful litigation in even of market turndown

The second legal aspect is what I have heard Chief Financial Officers identify as one of their nightmares. They wake up after a market downturn with employees saying: "You never told me this could happen." In the last three years at Ernst & Young, we have counseled about a half million employees through telephone counseling, face-to-face sessions, or group workshops. When you really sit down with people, it's an eye opener as to some of the things we take for granted.

I'll give you one vivid example. We conducted a program for an employer where we did workshops for all employees and, after the workshops, the employer paid for us to sit down with employees on a one-on-one basis to provide them with more personalized guidance. After the very first workshop, an employee signed up for a counseling session. She started her session by saying: "That was a great workshop. I really enjoyed it. I particularly liked the part about diversification. I really already understood diversification, but it's just good that you hammered it home, because a lot of the other employees don't understand it." So our counselor thought this was a great reaction to our workshop.

They sat down and our counselor said to her: "Please take out your 401(k) statement and let's take a look at it to see how you're positioned for retirement." This particular company, which I'll call Company X, had six funds in its 401(k), one of which was called the "X fund." The X fund had nothing in it but Company X stock. This employee, who had announced how important diversification is, takes out her 401(k) statement and it showed that almost 100% of her 401(k) money was in fund X. So our counselor said: "Do you realize that you have almost all of your money in fund X and that all fund X has is company X stock?" Her first reaction is the telling reaction. It wasn't "oh, I didn't realize that" or " gee I should have paid more attention." What instead was her first reaction? "No one ever told me that." And that reaction tells you right there what the problem is.

When faced with a result you don't like, the first reaction often is that no one ever told me that, no one else ever gave me the information to avoid a situation I didn't want to be in. This is the nightmare that is the basis of the lawsuits which will no doubt be brought in a market turndown.

The courts will end up sorting out responsibility and it is going to come down to this key question. Did what you provided in the form of employee financial education have a high likelihood of connecting with people at different levels. For some, it is strictly an intellectual exercise. You present them with the facts, they'll absorb them, and there will be no problem. But where I think the lawsuits are going to come are from those employees who did not have an emotional connection with risk. Bill Sharpe puts it beautifully when he notes that, in the 401(k) marketplace, the average participant has learned how to balance reward against reward, with no sense of what risk really is.

In our programs, we get participants to feel what a bear market is like. If you want to write down some numbers, this might be an exercise you'll find useful. When you look at the 70+ years of investment data, we've averaged one bear market every six years. I define a bear market as a decline of at least 20% over the course of at least a year in the Standard & Poor's 500. Overall, we have averaged that type of decline once every six years. We haven't had one, a real bear market, since 1973-74. Over that two-year period, depending upon which measurement you looked at, stocks lost 40% to 48% of their value. Now play with the numbers. If you believe in reversion to the mean, if once every six years we have a bear market and each one averages 20%, and we haven't had one since 1974, that's 25 years. Six into 25 is just over 4. Imagine if this next bear is one that has in it four pent up bear markets. Four x 20% is an 80% drop in value. It's important that employees at all levels recognize that this could happen and that it should not be a total surprise. Once you get people to connect to the possibility, then I think you've removed the allegation that "you know, you never really told me this."

I believe that such a claim will be the crux of any successful lawsuit. Did the employer provide information in different ways that every employee at every level of sophistication could truly connect with and really understand, especially when it comes to risks? This is what everybody's concerned about. Will a bear market open the flood gates to litigation?

That is the first value of proposition: to position employee financial education almost as an insurance policy against successful litigation. So, let me ask you, in terms of impact, by which I mean a potential corporate buyer who is going to look at that threat and say this could really hurt my company, how many of you would say that's a high impact value proposition? Many. How many of you would say moderate impact? Some. How many of you would say low impact? A few.The rest of you are being noncommittal. Noncommittal, like true lawyers.

What about likelihood? Likelihood here means the probability that an employee financial education program will in effect reduce that risk. How many of you think this is a high likelihood? Many. Moderate likelihood? A few. Low likelihood? A few more. This value proposition looks like it might come close to meeting the high impact, high likelihood test. My sense is that, of all the value propositions, this is the one that resonates most with companies today.

Bottom Line

The second value proposition is the bottom line. What Tom Garman and the Institute are doing really has focused on the bottom line arguments.

Increase Productivity

The bottom line value propositions come in many ways. Increased productivity is the key one and it's probably still the hardest one to prove. It has as its different aspects reducing:

workplace stress
on the job distractions
time off
lateness
absenteeism
finance-related physical and mental illness, including alcohol and substance abuse problems
the use of work time to address personal financial issues

If there is one seminal study that is needed, it is on the issue of employee financial education and its impact on on productivity, which is the focus of what the Institute is doing. This is critical.

Increase Employee Understanding

There are other bottom-line impacts. Can we teach employees to really understand the company's business, understand how the company makes money in its business, appreciate the competitive environment in which it operates, and be aware of the drivers of shareholder value? I don't know many companies who are doing this type of education yet, but I would predict that there will be a growing interest in workshops and programs that teach employees how their company makes money, and how their business units and their own jobs contribute in the overall scheme of shareholder value.

Turning individuals into mini-CEO's sounds very naïve when you hear it the first time, but I think more and more companies are starting to look for a different type of financial education that really shows employees how their company makes money, enables employees to manage financial resources, and even become better consumers of company products.

Looking at the workforce as a marketplace for the company can be another enticement to offering a financial education program. Reducing employer payroll taxes when employees use pre-tax Section125 plans represents a saving to the employer. This can be another linkage to the bottom line with a financial education program.

Finally, a financial education and counseling program can strengthen the inseparability of employer and employee interests. It can vividly demonstrate to employees at all levels a direct linkage between the financial success of the company and the success of every employee, which is really a variation on the first theme.

I would say that those are the key bottom-line impacts on which an employee financial education program needs to focus for success. Again, let me ask you, looking at all those different elements of the bottom line value proposition, how many of you would say those have high impact potential for companies? A lot of hands there. How many of you would say moderate impact? Only a couple of hands. Would anybody say low impact? Nobody says low. Now what about the likelihood that a financial education program can achieve this type of bottom line impact? How many of you would say this is a high likelihood? A few hands. Moderate likelihood? More hands. Low likelihood? A few hands. So, this really becomes the acid test I think for the kind of work you are doing, Tom.

Human Resources

The next value proposition category is human resources. How does a financial education program support the new strategic human resource function that we have been reading a lot about? The value proposition here is that an effective program will help the HR function attract, retain, reward and motivate the right employees to achieve a committed work force and become the employer of choice, which has now become the label that every major company is using. We want to be the employer of choice in our industry, in our community.

This has gone beyond being just the HR director's hot buttons. A recent study of chief executive officers asked the question: what do you think is the most important challenge facing you as CEO? After meeting shareholder expectations, the second was retaining the right employees. So, it's at the point now where CEOs are almost obsessed with the people challenges, which I think is great news for us.

Another aspect of the HR value proposition is to reduce HR cost by diverting financial questions to an expert resource. In some companies, HR folks are being bombarded with questions that are not within their core competencies to answer. They want an outside source to whom they can defer these questions. An employee financial education and counseling program provided by an external party can be a way to alleviate these pressures on the HR function.

Other HR value propositions address concerns such as: How does my company compete more effectively with industry peers who offer a program? How can we reduce pressure to become unionized? I think organized labor is going through a resurgence now, with much more sophisticated organizing techniques, which the Web has changed dramatically. How can companies use a financial education program as a wedge against efforts to unionize the company? How do you promote work/life balance and total employee wellness? How does a financial education program fit in with this newfound commitment toward providing a more helpful environment for employees? This, by the way, I think is growing on corporate radar screens as more important than ever.

How do you help individuals who could retire, if they only knew the facts, and actually accelerate their retirement decision? This will be a very big issue for those of you who are in my generation, born between 1946 and 1964. We are rapidly becoming the bubble that concerns corporate America. Corporate America has two fears about us. Fear number one is that we will all retire too soon and all the wisdom that we have earned in our lives will be lost. By the way, as a generation, we boomers have to come up with a definition of our value. To me, it is wisdom. That's the key ingredient corporate America is going to value, so we have to develop and package our wisdom.

If you want to read a very good book on the topic of boomers' legacy, it's one by Theodore Rozack. He wrote The Making of a Counterculture, when we were all students. When I see your interns here, it brings back fond memories of when we were all students in the '60's. Rozack's book was the bible, at least to some of us. He has now written a book called America the Wise and his theory is that the baby boom generation will transform America in our elder years. He believes we will do this because we have defined what wisdom means and will provide the business case for wisdom, which is our own way to save our jobs and permeate corporate America with a newfound sense of stewardship and a legacy. It's a very upbeat book.

The fear, however, is that on the one hand we will all leave too soon, or on the other hand we will not want to leave at all, which also causes concern in the hearts of many HR people. So, an employee financial education program that helps people see whether their own numbers tell them that they can in fact retire could be of great value in achieving HR objectives.

Let me ask you on the HR value propositions how high an impact you think they have. If we could show that a financial education program would help achieve those human resource goals, how high would the impact be in the corporate buyer's mind? How many of you would say it's high impact? Maybe 10% - 15%. How many would say moderate impact? The vast majority. How many would say low impact? Nobody. On the likelihood of a financial education program achieving those goals, how many would say high likelihood? Very few. Moderate likelihood? Most people. Low likelihood? Two people and let the record show that Tom Garman is one of those people.

Benefits

Value proposition number four is in the category of benefits. This is almost a subcategory of the human resource value proposition. The key points here are that a program can help facilitate benefit plan changes that require employee understanding and behavioral change. It can support the changing relationship of the employee to the benefits package offered by the employer. It can help employees take more responsibility for making critical decisions in and among their benefit plans.

The hottest issue right now, which you are all no doubt reading about, is the conversion of traditional defined benefit plans to cash balance plans, where employees are being given a choice between staying in the old plan or going into the new plan, and employees have one opportunity to make that choice. The choice is irrevocable and the pressure is often high. Many employees love being given a choice, but others are terrified by it. How does a program help them make that type of benefits choice in the best possible way?

Other aspects of the benefits value proposition are to generate greater employee appreciation for the employer's investment in total compensation and benefits. If you look at most companies' financial statements, you'll see the significant role that compensation and benefits expenses play. How do you convert that "expense" into an "investment" in terms of employee satisfaction? The key word here is the word "total," as opposed to looking at comp and benefits in fragments. How do you present the comp and benefits picture in a total way that employees can truly understand and then make the best use of their benefits?

How do you increase plan participation by the lower paid in order to pass non-discrimination tests? This one may be less and less of a concern as ERISA perhaps gets revised, or as the Department of Labor issues more attractive safe harbors for employers. So this non-discrimination test may become less of an issue, but it is still an issue today that we are running into when we talk to benefits folks.

The last benefit value proposition is how to enhance the attractiveness of flexible and voluntary benefits programs, as more and more employers offer employee-paid programs. Employers want to know that employees are electing offerings that really have value to them. As a result, I am seeing more companies put financial planning into the menu to enhance the attractiveness of the voluntary employee benefits offering.

Another buzz word that you might find helpful to hook a financial education program to is the new fascination with employee self-service. How can employers make employees more self-reliant? Can a financial education program really instill in people the ability to do more on their own that can then carry over to things like benefits self-selection, reducing administrative overhead, and reducing paperwork?

So those are the benefits value propositions. Again, with a show of hands, how many of you think those would have a high impact on companies, if we could correlate financial education to them? About three or four hands. How many would say moderate impact? Many more hands. How many would say low impact? About two, three hands. Now likelihood: is financial education likely to have this impact? High likelihood? Couple of hands. Moderate likelihood? More hands. Low likelihood? Interestingly, more of you than I would have thought think financial education has a low likelihood of providing value in the benefits arena.

Culture

Category number five is cultural. This gets into linking a financial education program to the values the company wants to instill in its employees. One of them is often to promote in employees an ownership mindset. As a result, employees will understand the value of company stock as an important part of their compensation. Particularly as more and more companies offer stock options to all employees, the hope is that they will begin to think and act like owners and investors, and not like "hired hands" so to speak.

The other aspect of the cultural message is to engage employees as active and financially astute partners in the enterprise. The message here is that all employees should have a strong personal identification with the company, what it stands for and the business it's in. Finally, those companies that are trying to make their core values explicit may want to position a financial education program as one method to translate those values into meaning from the perspective of the personal lives of employees.

How many of you think this is a high impact value proposition? Two or three hands. Moderate impact? Many more hands. Low impact? Two hands. It also looks like there are a lot of undecideds on this one. What about the likelihood that a financial education program would have a cultural impact of this magnitude? How many of you would say high likelihood? Maybe ten hands. Moderate likelihood? Maybe twenty. Low likelihood? Another half a dozen.

Social/Moral

The final value proposition is, I guess if we could all live in an ideal world, the social and moral value proposition. The social and moral value proposition says the following: We have an obligation as a company to prevent a potential national retirement crisis, if most individuals fail to achieve their retirement goals. That's the social dimension.

The moral dimension would be that it is simply the right thing to do as stewards of employee well-being. We will ask for no quantitative financial return at all from a financial education program. We just feel we can sleep better at night knowing that we are doing this for our employees. So, that's just good old fashioned idealism and altruism.

How many of you would say that this is a high impact value proposition in corporate America? One person. Moderate impact? One more person. Low impact? Everyone else. In terms of likelihood that a financial education program can achieve these, high likelihood? One person. Moderate likelihood? About eight people. Low likelihood? Everyone else. This one seems to be the longshot. The hope in some corners is that, as the boomer generation that still has some social idealism remaining assumes positions of more authority, then perhaps this value proposition will start to go up on the scale.

VALUE PROPOSITION RANKING

If you want to know where I come out on these six main categories of employee financial education value propositions, I think legal, bottom line, HR and cultural are the four high ones in that order. I think the cultural proposition has tremendous potential as being a high impact one. I would say benefits are moderate, and social/ moral are low.

In terms of the highest likelihood that a financial education program would achieve it, I think the benefits value proposition has the highest likelihood. I would then characterize all the others as moderate, with the lowest of these being the cultural. I think it is a stretch to link a financial education to the achievement of deep cultural needs.

PROGRAM POSITIONING

Once you have the right business case, then there is the positioning issue. I thought that yesterday we were getting some wonderful insights, especially from Steve Herrmann of American Express Financial Advisors, on how to position a program. Here is a scale of low positioning to high. A low positioning would be an event-driven offering. Here the employer offers a financial education program as a tool in connection with a one-shot event. The one-shot event could be converting a pension plan from one type to another. It could be offering an early retirement incentive, in connection with downsizing. It could be introducing a new 401(k) investment mix. Let's offer an education program once, let's do it perhaps big, but it's just in response to an event. When the event is over, the program dies with it. Often, this is the only way to get a program started at companies, that is, on an event-driven basis. I don't want to minimize this, because out of event-driven beginnings can come more sustained programs. But this seems to be the lowest positioning.

A program as an ongoing employee benefit would be a higher positioning. With an ongoing benefit come key questions. Is it paid for entirely by the employer, which would to me be the most successful type of ongoing program? The employer in effect is saying: This program is so important that we are going to pay for it for everybody. Alternatively, will it be employee-paid, or will it be a combination of employer- and employee- paid?

Will it be part of a work/life balance program? Don't underestimate the value of this, as more and more companies are spending more and more money on work-life balance. This might be an increasingly important hook, as you heard yesterday from the spokesperson for Ceridian. If financial education is embedded in the bundle, it rides the wave of work/life balance. This might be a great way to sustain it on a regular basis, especially if paid for by the employer.

Is it positioned as part of the employee assistance program? Here I think you have to be careful, since for most companies an EAP still is a barrier to employee utilization, because rightly or wrongly many employees view it as a stigma. If you position financial education and counseling in the EAP category, it might end up really hurting its use. For some employers, however, this is where financial education and counseling is going to be housed.

And then, to quote from Steve Herrmann and from Tom Garman, where we all want financial education and counseling to be positioned is not as just another benefit, but rather as the benefit that unites everything else. It's the cornerstone, it's the glue. I think that's the goal we want to get to and I think that should be our ideal program positioning.

THE SPONSOR

These are all the potential parties to be involved: VP of Human Resources, Treasurer, and Compensation & Benefits Director. Sponsorship means the individual who is going to announce the program and who is going to say, "This program is important to me." To get the Chief Executive Officer to sponsor the program is the ultimate, but I don't know too many CEO's who have. I know one, however, who has probably given the best value proposition for employee financial education and counseling I ever heard.

He was the CEO of Monsanto, a client of Ernst & Young. He was asked: "Why is your company spending money to provide a program like this for your employees?" And what he said was: "Our goal at Monsanto is to have employees who are so financially astute and so financially secure that they work for us because they want to not, because they have to." That was his definition of the value proposition. That is a strong cultural driver and an HR driver at the same time. That was his definition. When you get the CEO to sponsor the program, a lot can happen.

Then you go down the rung. The Chief Financial Officer is often an overlooked source of support. I think more and more CFOs are prime sources to sponsor this. Others may be: the Chief Operating Officer, who is the person who deals with day-to-day operations; the Chief Administrative Officer; and increasingly the Chief Information Officer, especially as technology becomes a critical business success factor. In short, the "C-Suite," as we call it at Ernst & Young, is where you want to be when it comes to program sponsorship.

If you are not in the C-Suite, then you are typically looking at these functions. The VP of Human Resources. This is not a bad sponsor to have, but very often not at the C-Suite in major companies. Where the VP of HR is at that level, then he or she becomes a more important sponsor. Increasingly Treasurers are getting involved in financial education programs, because they see the size of the assets in 401(k) plans. The Compensation and Benefits Director would be probably be the lowest level of sponsorship for an effective program.

THE CHAMPION

Then you have the champion, the person who owns the program, lives it and breathes it. The Benefits Director is typically the champion we are seeing who gives this program the best shot at success. A Benefit Plan Manager, the person who oversees, say, just the retirement plans, or perhaps just the 401(k) plan, might be a second level of champion. If the champion is a Benefit Communications Manager, then you're starting to slip down the hierarchy. Then I guess the weakest champion would be a Program Manager who is not at any of these other levels, who is really doing this as his or her main responsibility, but who does not have a position within the company that gives that person much influence or clout.

TIPS

Finally, just a few tips based on what we at Ernst & Young have been doing. A couple of do's and don'ts that I think you will find helpful.

Involve Multi-functional Teams
Number One - involve multi-functional teams. It is clear to me that, where the programs are most successful, you've got representatives of every key part of the company involved. You've got HR, Treasury, legal, perhaps even someone from the CEO's office, and, if there's a work/life balance person, he or she is also involved. The more broadly diverse the program team at the company, the more the program has the type of commitment, financial and otherwise, that you want from the organization. Link the Program to a Broader Company Initiative

Link the program to a broader company initiative.
If the program is out there on its own in a vacuum, you are going to find that it is susceptible to year-by- year or even quarter-by-quarter budget decisions. If you can link it to something broader and it can piggy back on that, I think that's a key. Now what do I mean by something broader? Some companies have committed to a balanced scorecard. If so, then positioning the program within the balanced scorecard would be a major strength. Some companies are going through a rigorous values and visioning process, in which they are making explicit answers to such questions as: What does our company stand for? What are the values we want driven throughout our company? This can be another great hook for a program with a strong cultural message. And then there are performance reviews. Wouldn't it be amazing if, as part of employees' performance reviews, they had to show that they went through a financial education program? Naïve? This will never happen? Well, we have living proof that it can happen.

The U.S. Army! I talked to the representative of the Army who is here today and learned that every soldier is required to take, as part of basic training, two hours of financial education, then, as part of advanced training, another two hours, and then, during the course of a year, another eight hours. Imagine if this were required by leading employers: that all employees had to do this as part of their performance reviews. I think we should dream big dreams and imagine going to companies and saying: This is the military model, this is not the social service model. That can be a very strong selling point.

Capitalize on the Web to Personalize Everything
Try to capitalize on the Web to personalize everything. The Web is the opportunity to transform employee financial education in a way that makes it much more powerful. You want to try to capitalize on this in everything you do. I would make the assumption that sooner or later -- and I think it's much sooner -- every employee of every company will be Web-enabled. Employees will have to be. Another way to sell financial education to companies, who are trying to train employees on using their intranet, is to train them by using a personal financial application. What better way to get people to use the Web than to give them something of immediate personal value, not just on-the-job value?

Don'ts, And then finally the don'ts

Promise Overnight Results
Don't promise or expect overnight results. Credibility is critical. I think we have to go in there and be very honest. I think the tone yesterday was brutal candor. Have we yet proven the deep business case for employee financial education? No, we have not. We are trying, and we are going to go about it with good faith and intellectual honesty. We are not going to promise or expect overnight results.

Evaluate Your Own Program
Don't evaluate your own program. This is a re-endorsement of external evaluators like Tom and others, so that the evaluation can be done without self-serving interest. It's the way, I think, companies are going to really look at this. And wouldn't it be great if we could establish one national certifying body that would say: Here is a commonly accepted methodology to prove or to document the impact of these programs. I think that should be the mission we try to accomplish. A unifying, certifying agency to do just that.

Confuse Attitudinal with Behavioral Change
Don't confuse attitude change with behavior change. While the two are related, they don't mean the same thing. What do companies ultimately want? They want behavioral change.

Rely Solely on Participant Self-statements
Don't rely solely on participant self-statements. While I think they represent a good starting point, most of us are using only these. In addition, you have to get third party validation. So, if a person just says "I now focus on my job more, because of the program," that's good but, is there any external validation as to what that means? I think we have to go to external validations and go beyond participant self-statements.

Interpret "No" as "Never"
Never interpret "no" as "never." The company says: "No, we don't want to do financial education this way; no, we don't want to measure it; no, we just want to position it as a nice thing to do." Today's "no" is not a "never" forever. If all of us keep preaching the same message, and companies keep hearing it, I think there will be progress.. I know when I go back to Ernst & Young and I'm asked - "who was your audience at the conference?," - I am going to be honest, that 90% of you are providers, and only 10% of you are plan sponsors.

And someone might then ask me: "Why did you make this presentation to an audience of providers? Aren't we all competing with each other?" Well, in one way we are. But I think we all win, if everyone is out there with the same level of credibility and the same level of commitment, and companies are hearing this from so may different sources. I think the pie is big enough that we can all win, but I think we have to do it the right way. There will be others out there doing it the wrong way, and we probably know who they are. If we can identify the employee financial education and counseling providers who are doing it the right way, with a commitment to results, I think we all win.

RESPONSES TO QUESTIONS FROM AUDIENCE

Q: Is that a channel to go through?
A: The question has to do with my opinion on companies that use brokers and consultants. I think you have to keep yourself open to that channel. Now I will be blunt with you: for every third party broker I've met who really understands the value of this, there are three who don't. And for them it is just another thing to get through and get done.

Q: Does Ernst & Young have a program for its own employees?
A: We offer all of our employees access to personal financial planning software, to our financial planning guides and to other online tools. We have also piloted a workshop program that we expect to be rolling out next year. We are doing it slowly but surely. The big hook for us by the way is the HR hook, the retention hook. If you read about professional services firms, retention is our key to future success and we are now starting to realize that personal financial education is a retention tool, which also has a work/family balance element to it. In other words, let's, on company time, give you something to help you with your personal life, so you can be more productive while at work. I would not want to stand here and say we have exactly the kind of program that I think we should have, but we are getting there.

Q: Is there a way to educate the buyer and move the likelihood up? I think that's what all of us have to do.
A: I'm just telling you today, if you want a snapshot of where the average decision maker is today, I think my assessments of likelihood are pretty good. Are there some companies where there is a higher likelihood? Yes. Find them! But for most companies, it is a question of how do you educate them to conclude that an employee financial education program is likely to help achieve the desired results.

Q: Do your programs use multi-media?
A: Yes, we have programs now that are offering multi-media to all employees. At the end of a program year, the key question that's being asked is: What percentage of employees accessed at least one of the tools? We have some programs where access was over 90%. We have a program underway now for a 70,000-employee company in which we actually have a third party evaluating it. The program just kicked off. Employee utilization of various media is one kind of result that we want, because that is the first step toward getting behavioral change. Go back to the scenario where a court of law asks: How many of your employees actually used the financial planning tools that you made available? If the answer is a very low percentage - and I have seen some employee-paid programs reach less than 1%! - can you imagine the impact that will have, if we get to that point?

Q: What do employees value most?
A: If you ask employees what they would like most, most would like to sit down one-on-one with a personal financial counselor. That is the high value/high cost approach. It is not feasible for most companies as an employer- paid offering, although we have had some. The client of ours that reached 90% of its employees provided face-to-face counseling on the company's time at the worksite. That's where I think the Web is critical. If we can simulate the one-on-one experience - and I contend it can be simulated, because the bulk of it is routinized - that I think becomes the low cost/high value way. But it has to cover more than just 401(k) or 403(b) investments. If a program just covers investments, then it is fragmented. It has to be a holistic approach, just as a good financial planner does in a one-on-one session. Artificial intelligence, knowledge management, data mining and other electronic means can get us there.

Q: Can it be done on the web?
A: I claim it can and it would be virtually as effective for 75% to 80% of the population. And it is at a much lower per-employee cost. Thank you very kindly.