Providing planning services as an employee bonus
Boston — While tighter company budgets are forcing a disappearing act for many executive freebies, one perquisite is popping up for more and more executives - financial planning services.
''There is a renewed interest in financial planning offered as a 'perk,' '' says William Lally, president of Hamilton Gregg Financial Services Company, based in Falls Village, Conn. Mr. Lally says his firm has lately been getting more inquiries from companies that want to give their executives access to professional tax, estate, and retirement planning services.
But financial planning services aren't just being offered to the very top officers, either, qualifies Paul Thompson, director of executive financial planning at the Hay Group, a firm that specializes in salary and benefits consulting.
''More and more companies are becoming interested in having one kind of financial planning for senior people, and other degrees of financial resources for other levels. You're going to see a proliferation of all kinds of services, '' Mr. Thompson says.
The statistics back up this renewed interest. In 1978, 18 percent of the 800 or so companies surveyed by the Hay Group offered finanical planning as a perk, or nonfinancial benefit. By last year, that figure grew to 28 percent. Over half of these programs were provided only for employees earning more than $60,000.
Corporations see financial planning as a ''reasonably inexpensive way to provide very material personal assistance to executives - to individuals who spend a huge amount of time working for their company but very little time working for themselves,'' says Thompson. What the corporations get out of the deal is ''goodwill,'' he adds.
One executive who uses a financial planner believes it's a service many managers could use. ''There are so many technical details to financial planning. Just because you're a corporate exec doesn't mean you have the know-how to manage (your personal finances),'' said the executive, who preferred not to be named.
The very top officers who use financial planning usually get one-on-one service from the planning firm. They may come in for as many as four sessions in the first year and keep in touch with phone calls, but these sessions would taper off after the organizing and goal setting done in the first year are over. Planning firms say the most-demanded service is tax planning.
The firms also help executives allocate their investments among stocks, mutual funds, money market funds, and collectibles, for instance. They are there to advise the executive on insurance policies and the best way to save for his or her children's college education. They can suggest what to do with a bonus or inheritance and how to plan effectively for retirement.
Some companies, such as Tenneco, give their executives the option of choosing their own financial planning firm. Other companies have set up a relationship with one firm and limit their executives to that one. If the executive were paying for the service on his own, it might cost anywhere from $1,500 to $5,000 a year, depending on the number of sessions.
While these person-to-person services are ''most effective for people with assets above $200,000 and in 35 to 40 percent tax brackets and up,'' says William Freund Jr., companies are also offering variations on the theme to lower-salary employees. Mr. Freund is senior vice-president at Prescott, Ball & Turben, a brokerage house in Cleveland which also does financial planning.
For instance, financial planning firms often give seminars for a company's employees about the basics of personal finance organizing. And some firms offer all their employees help on only a few selected subjects. At the Gillette Company, employees get free tax preparation and some tax planning services. At age 50, employees are eligible for free pre-retirement workshops.
A big player in financial planning for middle managers and salaried employees is the Consumer Financial Institute, in Newton, Mass. This firm, which has nearly 200 companies using its services - most of them in the Fortune 500 - offers financial planning by mail.
The firm sends the employee a questionnaire that helps form the employee's financial goals. The questionnaire is reviewed, and three weeks later, back through the mail comes a computer report on his finances and how they should be distributed to achieve those goals. The company also provides ''how to'' reference material about various subjects (mutual funds, insurance, etc.), but it does not recommend specific names of brokers, insurers, etc.
A system like this ''is an unbiased financial-planning help aimed at the middle-income family, where someone for $125 or less could get someone to pull their finances together,'' says George Barbee, executive director of the institute. But he recommends that firms pay for only part of the flat $125 rate.
''If the individual doesn't pay some small amount, they don't have a vested interest in doing a little bit of the necessary homework,'' he says.
Though Mr. Thompson at the Hay Group thinks the major benefit for corporations that offer financial planning services is the expression of ''goodwill,'' others disagree.
Mr. Barbee states that ''personal finances are a tremendous cause of stress which people bring to work with them.'' When this problem is taken care of, the company has happier, and so more productive, people working for it.
Also, a financial service that reaches more employees than just the top officers educates a larger number of a company's employees, Barbee says. With greater financial savvy, these employees may be more eager to join their company's savings plan - a big tax-free investment for the company if it can get enough employee participation. And, with more knowledge about retirement planning, a worker won't be tempted to stay on the payroll near retirement age out of concern that he hasn't planned well enough for retirement, he explains.
Finally, Barbee says, being educated about their own finances, workers understand more about company finances - that expense accounts aren't bottomless , for instance, or that a company budget is not always expanding.