Clear communication key to successful retirement planning

Tolstoy recognized how basic human behavior results from one’s attitudes and values. We know that how people spend their time and money is a reflection of their values.  Satisfying one’s needs and wants through a work/life balance while anticipating and preparing for retirement requires a multi-faceted approach.

The continual, iterative assessment of one’s future financial security requires skills, tools, and certainly motivation to ensure a successful retirement. Every employee will retire someday - even those in human resources management! The mandate for integrating employer sponsored retirement programs with plan members’ needs is generally handled through HR.  This is in addition to all the other challenges of managing an HR strategy and its implementation. Aligning an HR strategy with corporate business strategy is a constant juggling of immediate, short-term, and long-term issues.

The continuum for retirement plan sponsors providing employee communication and financial education includes the most basic governance policy that simply meets minimum compliance standards. Or, this can extend to the furthest extent of a top employer’s cultural philosophy of meeting and perhaps exceeding employee expectations for financial security.

HR professionals are required to keep current with existing laws, pending legislation, and trends in total compensation. Periodic reliance on colleagues, external providers and consultants who specialize in these areas is a must. Raising awareness, understanding, and appreciation of the value of an employer-sponsored retirement program in the eyes of the employee plan members is an important objective for HR professionals. Yet there are great challenges when communicating to employee groups. One of the greatest is literacy.

Literacy challenge
During the past decade, results of definitive international literacy surveys of Canadian adults, ages 16 to 64, proved astounding. In the past, literacy was traditionally defined as, “you either can read or you cannot read,” therefore, “you are either literate or not literate.” However, the current definition of literacy is defined by behavior: “using printed and written information to function in society, to achieve one’s goals, and to develop one’s knowledge and potential.”  (Taken from The International Adult Literacy Survey, 1995 (IALS).)

If we extract some fundamental results from those surveys, we will develop a heightened awareness and understanding of the challenges facing HR professionals and plan sponsors. As one begins to understand the implications of the results, keep in mind the issues around communicating and educating employees about their retirement programs.

Literacy not confined to reading and writing
IALS defined literacy in terms of the three following domains, each encompassing a common set of skills relevant for diverse tasks:

1.    Prose Literacy – the knowledge and skills needed to understand and use information from texts.
2.    Document Literacy – the knowledge and skills required to locate and use information contained in various formats.
3.    Quantitative Literacy – the knowledge and skills required to apply arithmetic operations, either alone or sequentially, to numbers embedded in printed materials.

Each domain also had five levels of complexity, from the lowest, Level 1, to the highest, Level 5.  To progress from the lowest to the highest, participants had to be able to complete the tasks at least 80 per cent of the time at each level and all three domains.

A Level 4 quantitative domain sample task/question included the following: Given $100 and a grid with increasing interest rates and number of years, the participant was asked what the total dollar value would be after investing the $100 for 10 years at 6 per cent.  Less than 20 per cent of adult Canadians completed the task successfully (they neglected to include the original investment!).

Even if 50 per cent had scored correctly across the board in all three domains, the implications are significant when plan members review retirement program booklets, annual statements, termination or retirement statements, or are asked to make choices regarding their program. Adult literacy and adult learning issues are not simple to solve. As society moves forward with enhancements to online learning, employers are relying more and more on technology to address commonly required communication and financial education content.

Developing a successful plan
“Nothing works all the time so you have to do everything all the time” is a variation on an old advertising cliché. HR professionals, along with their third-party administrators and consultants, traditionally do provide a variety of communication and financial education resources. But is there something more that can be done?
The following are key ingredients to having a more successful communication and financial education plan, especially for retirement programs:

1.    A clearly articulated philosophy regarding the extent to which the employer feels they have an obligation to provide additional resources beyond basic compliance and governance guidelines for employee communication and financial education regarding the retirement program.
2.    Creation of a financial education strategic plan that includes measurable objectives for the plan sponsor and the plan members, a variety of resources, and a documented file.
3.    A tactical implementation plan, i.e. a project plan that is dynamic and flexible over time that ensures accountability and plan member involvement.
4.    And, of course, a serious enthusiastic commitment from all levels of management and third–party providers to ensure continual success of the program.

What are the rewards when these communication and education plans are successful, and what are the consequences when these issues are not appropriately addressed?

Rewards for the employer and employee include:
•     Having a documented file that can be used by the pension committee and other management teams to measure
achievement of stated goals.
•     Ensuring continuity of the program over time in terms
of budgets and results.
•     Feedback from employees regarding levels of appreciation
and satisfaction with the retirement plan.
•     Guidance for HR regarding future workforce planning, especially attraction and retention strategies.
•     Reduced anxiety of employee financial and retirement planning security.

Possible consequences if these issues are not appropriately addressed include:
•     Not meeting compliance and governance
guidelines adequately.
•     Employee misunderstanding and having unrealistic expectations regarding the retirement program.
•     Current and future communication and education costs not being directed to resources efficiently.
•     Potential legal implications initiated by employees in the future due to inadequate knowledge regarding the retirement program, potentially leading to lower levels of income in retirement and unmet expectations.

In this highly demanding society of providing services, perhaps we should be reminded again that the employee is the client,
and that they are relying on us to work with them as supporting partners.

Ismo Heikkila, CFP, is the national director, financial education and employer services at T.E. Wealth, a Canadian leader in fee-onlyâ„¢ investment counselling and financial planning for high net worth individuals. T.E. Wealth is part of Jovian Capital Corporation (, a publicly-traded management and holding company with interests in a variety of financial service firms specializing in wealth and asset management. The Jovian group of companies operates as a national financial services organization with approximately $12 billion of client asset. Ismo can be reached at [email protected]