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© Copyright 2002
Rogers Media. The following article first appeared in the March 2002 edition of
BENEFITS CANADA magazine.
Education 101
A sound education strategy is crucial in times of market volatility.
BY SHARON SEIFRIED
 Here's how you can protect your employees, and your plan.
With Sept. 11, the technology market meltdown and the Enron Corp.
case, employees are finding that participating in a DC plan--notably
selecting their own investments--is not as simple as it was even
two years ago. Recent market events combined with an aging population
and growing evidence that Canadians aren't saving enough for retirement
mean having a sound education strategy is more important than ever.
There are a number of areas plan sponsors can focus on when developing
a strategy. The main goal of an education program is to convey all
of the legal and general investment principles associated with DC
plans to members. For example, information about basic investment
concepts and rules such as vesting provide a foundation on which
to address more complicated issues. Without this common ground,
sophisticated concepts are difficult to address.
The second issue to be tackled is access to account information.
There's nothing more detrimental to the perceived value of a plan
than when a member is educated about the need to save and plan for
retirement, but the individual doesn't know how to access information
or manage his or her own account. Teaching members about account
management tools is critical. A few years ago, the only way members
could obtain account balances or rates of return was through their
semi-annual statement or contacting a call centre during business
hours. Now members can access information around the clock--and
they do.
The best methods of communicating are also important to determine.
To convey messages successfully, employers should provide the same
message in a variety of media to address the differing learning
needs.
Investment knowledge is another issue. Some employees need to master
basic concepts, while others are more knowledgeable.
In a 1999 study by Environics and Marketing Solutions, both based
in Toronto, plan members said they wanted to receive advice on retirement
planning. Most members (78%) indicated they would take advantage
of the opportunity to meet with an investment professional once
a year to discuss their plan, and over 40% were willing to pay for
the service.
Advice is a double-edged sword, though. It is valued by members
but adds to the fiduciary burden of the sponsor. An employer could
be held responsible for the quality of information provided by the
adviser. This is why many organizations simply offer education.
There are a number of ways to monitor and evaluate the professionals
who offer investment advice. The first is to be involved in the
process. Providing too much information without policing it can
increase a sponsor's liability.
Second, sponsors should look for advisers with professional designations.
These designations ensure advisers adhere to ethical standards,
which may also protect the employer. In addition, commission structures
should align with the employer's own goals and regular monitoring
is critical.
Reviewing plan demographics and activity is one way to assess the
impact of advice on members' plan management. Gathering feedback
from employees and advisers is another.
As a final consideration, it's important for sponsors to think about
setting goals to measure the financial health of their DC program.
There are several ways to do this.
Reviewing member demographics and surveys are popular and effective
methods. A more thorough approach involves actually testing members
on their investment knowledge. Comparing employee groups is also
a good gauge.
All of these steps are important because education is crucial to
the financial health of a DC program and members' successful retirement.
It also ensures sponsors' fiduciary responsibilities are met. While
education is always valuable, it is critical in times of market
uncertainty. BC
Sharon Seifried is customer service vice-president,
pension and group savings, with Clarica in Waterloo, Ont. sharon.seifried@clarica.com.
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