Financial Literacy for Employees

Understanding what makes an effective financial education program

Part 1

WHITE PAPER

If the recession put anything into perspective, it’s that when a person’s finances suffer, so too does their health and well-being. Over the last four years, the United Kingdom’s National Health Service saw a 43% rise in antidepressant use; the rise, some experts say, is likely the result of mounting financial pressures.

When people are worried about money, it’s often difficult for them to focus at work. Studies show financially stressed employees spend hours dealing with personal financial issues while on the job. When this happens, productivity drops and engagement falls.Some people come in and don’t get much done and others just don’t bother coming in.

It’s been shown that educating employees — using an experienced, accredited, third-party financial educator — on how to manage their finances properly can alleviate much of this stress. However, the discussion around employee finances must focus on more than just pensions and benefits. Education needs to be comprehensive; it must include a range of topics from managing debts to taxation and income planning. This allows virtually every employee to participate in the program.

So why do so many programs fall short? Why doesn’t the information given by benefit and pension providers lead to real change? Information is not education. Information is given (and forgotten). Education is taught (and learned)!

Fortunately, there are many ways to deliver this education. Depending on the budget, webinars, group seminars and one-on-one training are the most effective methods. Programs need to be flexible: what will work best will depend on each individual business.

Most employees don’t take the time to seek out help on their own, which is why research shows that employees want to receive this type of education at work and from a third-party professional who does not sell product.

But what exactly is financial education in the workplace? This paper will answer that question and explain everything from what type of information should be offered, to how it should be delivered, who should give it and more.

Executive Summary

© 2013 Employee Financial Education Division 2

of employees WANT financial education!

87%

60%of businesses believe employee financial education will improve productivity with 32% didn’t know.

Challenges Companies are Facing

Businesses worry about a lot these days: productivity, engagement, the economy, employee morale, staff stress, wellness and much more.

The pressure to find solutions for increasing productivity and engagement while reducing costs and increasing revenues has never been more difficult. Declines in global demand with increased global competition make it very difficult for businesses to spend money on employees and more often has resulted in greater cutbacks including layoffs.

These conditions have had a direct impact on employees and their confidence and commitment at work. The result is the exact opposite of what businesses need.

Employee financial education can help to restore the confidence and commitment of the employees to restore the productivity and engagement of the staff. The investment in a comprehensive program that all employees can participate in will not only help the company in the short term, it has an effect that lasts for years!

Financial issues plaguing employers

The Economy

• 66% of business owners expect sales growth to either remain the same or drop over the next 12 months.1

• 47% of executives think the domestic economy’s slow growth will continue for the next one to three years.2

Employee Morale

• 54% of executives are worried about employee morale and burnout3

• 51% are concerned about losing top talent

Absenteeism, Presenteeism and Stress

• Employees are absent from work for nearly 1 week a year 4

• 40% of employers said that work-related stress has increased over the last 12 months

• Nearly 33% of employers have found an increasing number of employees showing up to the office, but not engaging with their work

of business owners expect sales growth to either remain the same or drop over the next 12 months.

Financially distressed employees spend 13% of their workday (1 hour) dealing with money issues6

Introduction

1 Bank of Canada. Business Outlook Survey, October 2012. 2 Canadian Business, Compas Inc. CEO Poll: When Will the Economy Recover? April, 2012. http://www.canadianbusiness.com/article/81332--ceo-poll-when-will-the-economy-recover. 3 Benefits Canada. Employee Burnout Top Concern Among Firms, March 2011. http://www.benefitscanada.com/news/employee-burnout-top-concerns-among-firms-14864. 4 Chartered Institute of Personnel and Development. Absence Management Survey, October 2012.

© 2013 Employee Financial Education Division3

66%

1 hour/day

Financial issues plaguing employees

There’s also a lot your employees are worrying about.

High absentee rates and higher incidences of stress have to do with how employees are feeling at home and at the office. Finances and work life are cited as the two biggest sources of anxiety for the majority of Canadians.5

80% of Canadians believe their employers should play a role in helping to manage stress.6

Money

• 61% of workers cite money problems as their leading cause of stress 7

• 25% of people say debt is their main concern

• 45% feel their level of financial stress today is high too overwhelming

• 24% say the economy is their biggest worry

Work

• In April, 28% of Canadians thought there would be fewer job prospects by the end of the year8

• 14% of people are unsure about job security9

When employees worry about money and job security, productivity and work engagement suffer.

Top three work time use statements:10

• 30% of employees took time to handle personal financial matters

• 22% spent time worrying about personal finances

• 17% talked with a coworker(s) about money problems

People with high debt stress also face many health-related issues:

Introduction

4

27%had ulcers or digestive tract problems, compared with 8% of those with low levels of debt stress

44%had migraines or other headaches, compared with 15%

6%reported heart attacks, double the rate for those with low debt stress

29%suffered severe

anxiety, compared with 4%

23%had severe

depression, compared with 4%

51%had muscle

tension, including lower back pain,

compared with 31% of those

with low levels of debt stress

11

indicated distress over financial matters contributed to irritability, anger, fatigue and sleeplessness.

More than 52%

5 Sun Life. Sun Life Health Index: 2012 Canadian Health Index Report, November 2012. 6 Atkinson, W. Drowning in debt, HR Magazine, 2001. 7 Desjardins. Canadian Workers Feel More Financial Stress in 2009, June 2009. 8 Canadian Press. Consumer Confidence Reverses Course As Canadians Worry About Jobs, Finances, April 2012. 9 Thomsons Online Benefits. Job Security Still Among Top Concerns For Global Consumers. July 2012. 10 Jinhee Kee and E. Thomas Garman, Financial Stress, Pay Satisfaction and Workplace Performance, January/February 2004. 11 Aversa, J., Associated Press. Stressed Over Debt Taking Toll on Health, 2008.

© 2013 Employee Financial Education Division

“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”

— Chinese Proverb

Workplace financial education should be more than an information session, a glossy brochure or fancy tools on a website.

Employees must be able to relate to and put into context the information they learn. They must be able to apply the lessons they learn to their daily life and that only comes through education. Simply handing out materials, pointing employees to a website or talking at them won’t get the message across or change behavior.

“There are many great websites, books and resources that can make employees financially literate and the problem is that none of the resources educate. People find these tools and don’t know where to start or what to do — that is where an educator comes in to deliver real change,” says Frank Wiginton, CEO of the Employee Financial Education Division.

Employee financial stress will only decrease if comprehensive and customizable financial education is taught in the workplace. Employees need to be taught by qualified educators and shown how to use tools and resources in the proper context in order to learn how to get their own finances in order. If not, money-related problems will persist.

“Information is not education. Information is given – education is taught!” — Frank Wiginton, CEO of the Employee Financial Education Division

It’s About Education, Not Information

© 2013 Employee Financial Education Division5

With companies that provide financial information, 60% is based on pension and retirement planning,12 even though it’s debt and personal finances that employees are most worried about. While some companies said they do offer other types of financial information, topics such as budgeting, debt management, education savings, goal setting, RRSP, TFSA and investing were low on the priority list.

Pensions are an important part of the discussion, but planning can’t be done in isolation. During the Financial Education in the Workplace Roundtable 2012, which was hosted and moderated by the Employee Financial Education Division, Jane Rooney, Director of Financial Literacy and Consumer Education for the Financial Consumer Agency of Canada said:

“(Financial education) needs to be put in a broader perspective. This is about financial stability, which is what really matters to bottom line. The discussion needs to be broader than just pension benefits.”

The education needs to focus on making employees more financially self-sufficient and that’s not happening right now.

At the roundtable, Don Stewart, former CEO of Sun Life Financial, said:

“It’s incumbent on the employer to help employees become more self-sufficient financially. That has to be the prime motivation here.”

Studies show that when people are given financial advice, whether through an employer program or on their own, returns improve. Those who seek financial advice see their assets grow by 1.58 to 2.73 times more than those who don’t get help.13

Employers are now starting to realize that more comprehensive financial education is needed. When business owners were asked if their company will consider offering a more comprehensive financial education program, 84% of respondents said possibly or yes.12

It’s evident that financial education is required. When employees receive a comprehensive financial education, it helps them to put all of life’s financial aspects into context and empowers them to make better decisions and have a better quality of life. In turn, they come to work as happier, more productive and engaged employees.

of employees have not sought any financial advice in the last 24 months!

There’s More to Finances Than Pensions and Retirement

12 Employee Financial Education Division. Financial Education for Employees Survey. October 2012. 13 Canadian Press. Canadians Need to Spend More Time and Energy Finding Financial Advisors: Experts, October 2012.

© 2013 Employee Financial Education Division6

51%

Topics that financial education in the workplace must address

Leading Canadian financial experts agreed that a comprehensive financial education program should at least teach employees how to do the following:14

• Set and achieve goals

• Build a net worth statement

• Build a cash flow statement

• Income and debt management

• Determine life insurance needs

• Retirement planning

• Investment management

• Tax Planning

• Create a Will, Power of Attorney and Personal Care Directive

“The goal is about helping people make better decisions. You can make great decisions around benefits, but then make bad decisions at home,” Laurie Campbell, Executive Director of Credit Canada Debt Solutions, said during the roundtable.

Gary Rabbior, President of the Canadian Foundation for Economic Education added:

“Saving for kids’ education, managing credit, knowing basic investment tools: that’s what’s important.”

Frank Wiginton said:

“When educating employees on pensions and benefits, I get a lot of questions from employees. Most of these questions relate back to the individual’s basic personal finances and not understanding how the benefits relate. It clearly demonstrates that without educating employees on the basics, there is little value in educating them on their benefits.”

Offering comprehensive and customizable education

While financial education offerings should cover all bases, it must also allow for some degree of flexibility. Not every topic will apply to every employee or every employer. At the roundtable, the financial experts agreed that while the basics should be included in workplace financial education, other aspects could be optional.

“Let whoever is (sponsoring) it decide. They might say ‘the highest reason for absenteeism is caring for aging parent.’ Let them address that issue,”Gary Rabbior said.

Requests for financial counselling increased at twice the rate of all other EAP services.

Financial Education Must Start with the Basics

14 Employee Financial Education Division. Roundtable on Financial Education in the Workplace. October 2012.

© 2013 Employee Financial Education Division7

Preferred employee formats to receive financial education:

Studies have found that a blend of many methods work best, though some are more effective than others and some are considerably more expensive than others.

Employees who attend financial education seminars had participation rates in work-related retirement savings plans, 12% higher than those who were offered no seminars.15

80% of employees took steps to improve their financial health after attending a one-on-one session.16

Marie Donnelly, Vice-President Consulting, Communication Practice at Aon Hewitt, said the format

“needs to be appropriate to the audience.”

For instance, younger employees may want parts of lessons delivered through social media. One survey shows that 42% of Facebook users check the site every day and that 57% of people find financial-related social media messages helpful.17

Frank Wiginton countered that

“social media messaging can be great for follow-up messaging and without first educating the employees and giving them context to relate those message, the impact of the social media and messaging is dramatically reduced.”

Two themes that came out of the roundtable on financial education in the workplace was that education material has to be easily digestible and it has to be delivered in a format where an educator is leading the program.

Jane Rooney commented:

“Self-study and recorded webinars don’t give a person the ability to ask a question. That’s where a lot of the value comes from. Facilitators help provide discussions. People want to hear stories.”

Gary Rabbior has found that most delivery methods can work as long as participants trust the facilitator.

“It’s about a sense of trust. Materials were also important, but ultimately it comes down to trust.”

When doing in-person education seminars, smaller groups work better. Rabbior has found that having 10 to 12 people in a group works best. Beyond that, facilitators can’t give each attendee the proper attention. This, along with one-on-one counseling, may be most effective — though it is also very expensive and time intensive.

Education materials have to be digestible and delivered in a format where an educator is leading the discussion.

Best Delivery Methods for Financial Education

15 Bayer, Patrick, Bernheim, Douglas, Scholz, John. The Effects of Financial Education in the Workplace: Evidence from a Survey of Employers, September 1996. 16 Principal Financial Group. Face-to-Face Education Drives Better Retirement Savings Behaviour, July 2012. 17 O’Neill, Barbara, Zumwalt, Andrew, Gutter, Michael, Bechman, Janet. Financial Education through Social Media: Can You Evaluate Its Impact? 2011. © 2013 Employee Financial Education Division 8

LEARNING EFFECTIVENESSCOST

EMPLOYEEPREFERENCE

#1 in-person seminars

one-on-one coaching#2live webinars#3self-study/video tutorial#4self-study workbook and guides#5social media and short clips#6

#7 blogs/e-mail/newsletter articles

The individual who delivers the education is as important as the education being delivered

Avoid liability by using a third-party professional.

A vast majority of employees and employers think an accredited independent third-party educator should do the training12.

According to law firm Borden Ladner and Gervais (BLG), hiring an outside professional to lead financial education can protect your company from potential legal actions.

“Words matter. Employers need to remember that they may be legally responsible if they provide incorrect facts or bad advice to their employees. (…) When you hire an outside consulting firm to provide financial education, you benefit from their expertise. This is particularly important if your company does not have that expertise itself. If you select the right consultant and put the right agreement in place, this may also protect you from liability.” 18

In another BLG report, the author writes:

“What happens if the plan provider — or company — doesn’t have the necessary expertise to provide financial education? It’s not an excuse to plead ignorance. If the plan provider lacks knowledge or expertise, it must educate itself or hire someone with the necessary skills.” 19

Accredited financial educators are key

80% of employees and 82% of companies believe it is important to have an accredited financial educator providing the education.12

While an independent third-party is important, the key is that he or she is accredited. Fortunately, many financial educators do have the CFP — certified financial planner — designation.

During the roundtable discussion on financial literacy in the workplace, Lana Thompson, Director of Industry Engagement at the Financial Planning Standards Council, commented:

“Accreditation is very important. My fear would be to have someone who didn’t have the knowledge giving information that wasn’t correct. It’s hard enough to get employees engaged. You don’t want them to get wrong information.”

Many people already trust accredited professionals — reports show that 10 million Canadians are currently using some type of financial advisor.20 This statistic proves that people trust financial professionals and want advice from them. It only makes sense, then, to have an accredited professional teach financial education in the workplace.

of companies stated the company itself provided the financial education

Educators Must Be Accredited, Experienced and Unbiased

9

18 Kremer, F. Markus. A Litigation Lawyer’s Perspective on the Benefits and Risks Associated With Providing Financial Education to Employees, 2012. 19 Harrison, Andrew. Understanding Pension Providers’ Obligations to Provide Financial Education, March 2012. 20 Marowits, Ross, The Globe and Mail. Financial Advisers Aren’t Just for the Rich and Nearly Retired, October 2012. http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/financial-advisers-arent-just-for-the-rich-and-nearly-retired/article4607809/

© 2013 Employee Financial Education Division

57%82% of companies

80% of employees

Experienced educators make the difference

86% of employees and 87% of companies believe it is important to have an experienced financial educator providing the education.12

The complexities of personal finances and how they relate to an employee’s personal situation can be intimidating. Relying strictly on someone who has experience in delivering training or education can lead to misinformation or a lack of engagement in a program.

If the educator does not have the experience in personal finances or the experience training and educating, the impact and effectiveness will be lost. Worse yet, if incorrect information is given out, it could lead to liability.

No sales pitch allowed!

87% of employees and 88% of companies believe it is important to have an unbiased (no product sale) financial educator providing the education.12

Most people are tired of constantly being bombarded with sales pitches from the financial services sector. So much so that whomever you bring in to deliver the financial education better be independent of these companies and not be able to sell any financial product.

Although many of the financial services companies are very qualified to provide financial education, their primary business object is to sell financial products and this alone may create a perception of non-neutrality.

Financial services companies may be qualified to provide education and their business objective to sell financial products may create a perception of non-neutrality.

Success often comes down to who is giving the education and if they can be trusted. As this paper has shown, a third-party, unbiased, experienced, and accredited financial educator is the source that most Canadians and employers trust.

Critical to the success of a financial education program will be the educator’s ability to give real life examples and field questions that address nearly any situation.

Educators Must Be Accredited, Experienced and Unbiased

10© 2013 Employee Financial Education Division

87% of companies

88% of companies

86% of employees

87% of employees

Studies have shown that employees want financial education in the workplace and that many workers aren’t satisfied with the current state of their finances:

• 87% of employees want financial education21

• 48% are willing to pay some or all of the costs

• 51% have not sought financial advice in the last two years

• Less than 40% are satisfied with their current financial situation

Offering comprehensive financial education at work — taught by an unbiased, experienced, and accredited financial educator — will help people get their financial house in order, which helps to alleviate stress.

Reducing the largest stress of the majority of your employees will directly impact productivity and engagement. Organizational commitment along with participation in benefits and pension should also see a bump.

That will then reduce absenteeism, presenteeism and other health issues. It also brings drug benefit costs down, helps with mental wellness and it can reduce employee turnover, too. When those issues are addressed, productivity and employee engagement rises.

Our economic and financial concerns won’t be going away anytime soon. So now is the time to seek out an educator who can help your employees to properly manage their money.

Comprehensive education from a trusted, accredited, experienced educator is the key to a successful financial literacy program for all your employees.

Conclusion

11

21 Employee Financial Education Division. Financial Education for Employees Survey. October 2012.

© 2013 Employee Financial Education Division

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We develop, deliver and implement customized financial education programs for businesses with 10 to 10,000 employees. We do not sell or manage any products and only provide financial education services.

Education Not Information

Our programs are designed using the most modern adult education methods to ensure your employees are educated and not just informed.

Financial Basics and Much More

Our modules cover the entire personal finance spectrum. Lifestyle planning, debt and cash flow to investing, retirement, tax, and estate planning make up the core programs. Additional programs on elder care, children’s education, and executive compensation are also available.

Available in All Formats

Seminars, webinars, one-on-one coaching, individual financial planning, self-study, recorded webinars and video are all available. All our education can be taught in most formats. We will work with you to help determine which is likely to be most successful.

Delivered by Accredited, Experienced Professionals

All our facilitators are experienced at delivering personal financial education. They also hold at least two personal finance designations. This combined knowledge and experience ensures employees’ questions are answered and the correct information is given. It also increases the rate of change in your employees.

Determining Employees’ Wants and Needs

We work with you by conducting a comprehensive survey to help identify your employees’ wants and needs for a financial education program. We run the survey and conduct a few interviews confidentially to understand the underlying financial concerns of your employees. We use the data to build a proposal recommending the best topics, times and formats to ensure a successful financial education program.

Measuring Performance and Defining Success

Through our proprietary methods we assess the employees’ financial wellbeing prior, during and post education to be able to measure the change. We work with you to define what success looks like and develop ways to measure the performance of your employees.

Program Communication

We know that you and your team are busy running a company. To make it easier and help to ensure greater participation and engagement in the program; we have developed a communications package for you to add your names and logos to. From initial communication from the CEO to the ongoing communication of the various modules, this package takes the work out of getting employees to participate.

To discuss the goals of your business and help your employees achieve a better quality of life, please contact Frank Wiginton.

Financial Education – It’s ALL We Do

Frank Wiginton, CEOEmployee Financial Education Division

frank@employeefinancialeducation.ca employeefinancialeducation.ca 416-999-7392 877-227-8201

© 2013 Employee Financial Education Division

13© 2013 Employee Financial Education Division

Guide Employee Financial Education10 steps to successfully implementing an employee financial education program Part 3

Learn More about Financial Education in the Workplace

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Increase Profitability Through Fiancial Literacy Restore productivity and regain organizational commitment through employee financial education

White PaPer

Financial Literacy for Employees Understanding what makes an effective financial education program Part 1

White PaPer

Workplace Financial EducationThe benefits and rewards of a financially literate workforce Part 2

Guide

howtoeatanelephant.cainfoGraPhic 1

Financial Education in the Workplace

87% Financial Education in the Workplace

48% are willing to pay some or all of the costs

have not sought financial advice in the last 24 months

51% of employees will participate in financial education

86%

$2,000 a year employers can save from a financially healthy employee

3:1or more ROI for employers who offer employees quality financial programs

$

during work hours

during lunch breakat home on my own time on the weekend

Preferred formats for receiving financial education:

LEARNING EFFECTIVENESSCOST

EMPLOYEEPREFERENCE

#1 in-person seminars

one-on-one coaching#2live webinars#3self-study/video tutorial#4self-study workbook and guides#5recorded webinars#6social media and short clips#7

#8 blogs/e-mail/newsletter articles

of employees WANT financial education

feel that it is very to extremely important to have an EXPERIENCED financial educator providing financial education

86% 80%feel it is very to extremely important to have an ACCREDITED financial educator providing the education

Preferred times to participate in a financial education program are:

right after work

Financial Literacy for Employees

Companies top concerns regarding employees and their benefits:

When do companies provide financial education?

of companies feel the education provided is useful59%

PRODUCTIVITYENGAGEMENT

MARKETPLACE COMPETITIVENESS

SALARIESORGANIZATIONAL COMMITMENT

TURNOVER

BENEFITSDRUG BENEFIT COSTS

MENTAL WELLNESS

ABSENTEEISMPRESENTEEISM

HARASSMENT

WORKPLACE VIOLENCE

during work hours

on employee’stime

lunch breaks

weekends

right after work

69%

50%

of COMPANIES say they offer financial education

of EMPLOYEES say their company offers financial education

vs

Who provides the financial education?

57%company HR

38%independent

3rd party provider

28%benefit provider

27%employee assistance

provider

72% of companies believe employee financial eduction will benefit them

42%online self-study one-on-one coaching

39%live webinar

59%live seminar

How companies are providing financial education:

32%

Companies want education from a third-party educator to be:

82%

88%Unbiased

87%Experienced

Accredited

infoGraPhic 2

Financial Literacy for Employees

Increase Profitability Through Financial Literacy

Restore productivity and regain organizational commitment through

employee financial education

White PaPer

Financial Literacy for Employees

Understanding what makes an effective financial education program

Part 1

White PaPer

Workplace Financial Education

The benefits and rewards of a financially literate workforce

Part 2

White PaPer

Employee Financial Education

to successfully implementing an employee

financial education program Part 3

Guide

STEPS10