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Benefits and Pensions Monitor

The Need For Training And Education

By: Hugh Mowat

During the past years, I have watched the Defined Contribution pension plan marketplace explode as companies embraced the lower cost of providing an alternative to the Defined Benefit pension plan for their employees. However, at what cost?

The general consensus for the dramatic shift has been varied. Numerous articles have been written extolling the benefits of the Capital Accumulation Plan programs including, but not limited to:

• Lower costs
• Providing more control to the employees in an ever-increasing mobile workforce (interesting to note that it is becoming less mobile as employers struggle to keep employees)
• A broader choice of investments

As the marketplace has expanded and the perceived demand for more involvement by the employees has grown, so has the race to provide more ʻtools.ʼ (I always believed that tools were what one bought at the hardware store!)

It is the insurance and mutual fund companies that have benefited most from this phenomenal growth. To be fair, they were the ones that recognized the opportunities and spent the capital to provide a better product with more bells and whistles to attract more and more new clients. The mutual fund and investment industries have also grown in product offerings in what has become an increasing tableau of investment alternatives.

Something Is Missing

But, something is missing. It may be true that todayʼs workforce is, or has become, a more sophisticated investor and educated about investments and selection, but I wonder. What percentage of the workforce involved in these plans really understand what their plans are about, the difference in the various types of mutual funds, the associated costs, and what the options are going to be when they get closer to retirement? And do they really understand the vagaries of the marketplace?

In my opinion, most employees are not sophisticated investors. Faced with multiple funds, how do they choose the right one?

The solution, I believe, is in training and education. By this, I do not mean giving them more ʻtools.ʼ I believe in a real education and training process from the ground up – not simply providing a program with a bunch of tools and being told to go home, log-in, and make decisions.

If I may use a simple analogy: You want to build a deck in your backyard. You venture into the local hardware store and discuss your plans with an associate. The associate will normally do three things:

• Provide you with a computer generated depiction of your proposed deck (assuming you have provided some idea/drawing with dimensions of your project).
• He/she will discuss the ʻtoolsʼ and materials needed to complete the project.ʼ
• They will likely suggest that you attend a free seminar on how to properly complete your project including the use of the ʻtoolsʼ and how the pieces of material fit together. (They say a picture is worth a thousand words.)

Most employees have enough decisions to make in their day-to-day lives. They need a more structured approach/training to take full advantage of the programs they are being offered. It is the one missing link in the whole process.

Start With The Basics

So, what should it include? Well, letʼs start with the basics:

• What is a mutual fund, a bond, or equity?
• Who is footing the bill and what impact does that have on my return on investment?
• Iʼm getting awfully nervous about retirement – how do I know if I will have enough?
• How much do I really need to retire or change careers without affecting my family?

These are but a few of the areas to be considered.

So how do we fix this problem? Simple, we go back to the basics. We provide employees with the education and training they need to better understand and utilize the programs (tools) they are being offered. This can be done in a classroom environment or, for companies with multiple locations, through interactive webinar programs.

• First, you must decide on the training required
• Second, you must structure and deliver the training
• Third, you must be able to validate the training

If you wish to retain good employees over the long term, you must invest in the education of these employees, not only in their primary job function, but also in the benefits you are providing them. This is simply not an option any longer, it is mandatory!

Let me finish by saying that there are some very good examples of companies that currently do this – particularly large corporations with the resources (both financial and human). My focus is on the small and mid-sized companies who will, or may, need guidance and assistance in these areas. But, as we move forward, this is an area of ever increasing complexity that needs to be monitored continuously.

And a final note – when choosing what is a useful tool, one should explore all of the options, not simply what is being offered by a particular service provider. Sometimes they cannot see the woods for the trees because they are too close!

Hugh Mowat is president of The Recordkeeper Ltd..

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