In the last thirty years, the financial services industry has been radically transformed by computers and more recently, by the Internet. The traditional products on which the industry was based, insurance and investments, have evolved into a panoply of complex offerings described in great detail either by thick prospectuses or weighty regulatory documents, indicative of the risks faced by consumers. Since they are uniquely numbers-based, financial products and services attract quantitative analyses.  Modeling and re-design bring new iterations.

Actuaries, academics, attorneys and securities analysts concoct dynamic and complex financial products., Some have been wildly successful, like universal life insurance.  Mutual funds and their derivative, index mutual funds, are another product example.  Multivariate interpretive reports, which use the “capital asset pricing model,” the Monte Carlo simulation and efficient frontier analysis for personal financial portfolio management are now offered in some form in nearly every service.  Complex trading products and services that promise real-time analysis of market trends and exchange patterns are even advertised on “The Simpsons.”

The same forces penetrate money and banking: reverse mortgages and variable rate mortgages are current examples.  To make matters worse, all of these products and services are “regulated” by complex regulatory structures involving state and federal agencies all vying for revenues as they impose protective measures on financial product use and the advice service that has been developed to “sell” them.

Where do consumers meet and participate in this complexity? Most folks spend most of what they make and only pool assets in retirement accounts. Employers offer insurance products, investment accounts, loans, tax data forms and direct-deposit-fed online banking. Therefore, the workplace has become the most important center for broad introductory distribution and innovation of financial products and services. However, the complex financial products and services which are delivered to the workplace are bewildering to consumers. The levels of (tax, securities and labor) regulatory compliance and potential liability expose investment companies, plan sponsors, carriers and employers to risks that are difficult to understand, let alone manage.

Businesses who maintain the workplace don’t like liability or the litigation that accompanies it. To help them avoid potential suffering, benefits consultants and employers have either created account-based plans, moving risks and responsibilities to employees, or they have forced conversion of employees to benefits accounts with “black boxes” that make decisions for them. But employees are adrift, lost in a sea of jargon tossed by the waves of constantly expanding government regulations and tax law changes.

Consumerism is the theory that giving employees responsibility and power over their own affairs will encourage responsible behaviors. Employers use consumerism to shift liability away from the company to the employee. Products and services controlled by the employee are currently the rage in financial services. Defined Benefit retirement plans and Consumer Driven Healthcare are the result. But, as a recent Employee Benefits Research Institute (EBRI) study points out, the weakness of account-based benefits models is the fallacy that the consumer will take on the responsibility being offered to them. Many employees will not make intelligent choices and take appropriate strategic actions, because doing so immerses them in unfamiliar and even unintelligible complexity. Employers have met this challenge with more financial education, more product knowledge and more marketing-savvy products. But something more is needed. Higher paid employees pay professional advisors to help them. Under ERISA, lower paid employees are offered the same benefits account structures, by law. Surely they need the same assistance.

Myfinancialadvice has developed the ability to deliver high quality financial planning advice to all employees. Drawing on the large population of independent Certified Financial Planner professionals available through professional associations, and packaging advice sessions in focused, affordable packages, MFA delivers advisors through the Internet and phone for employers who have begun to understand that the solution to poor decisions is better decision support, not only in calculators and education, but through “in-person” coaching. Forward looking employers want to provide the calming assurance of a professional to all there employees, where and when needed.

An academic lecture on baseball, a comprehensive brochure on the fine points of the game, the availability of exhibition games to review, availability of good bats and gloves, peanuts and hot dogs even accompanied by a band singing “Take me out to the ballgame” only prepares a few to actually play baseball with confidence. Open Enrollment for benefits decision-making, for example, is probably terrifying to 30%, intimidating to 60% and only satisfying to the 10% of any employee group who are pure do-it-yourselfers. Employees need knowledgeable advice they can trust. They really don’t need another brochure or online calculator. They need a coach who is or has been a player, who knows the home field, who can offer effective tips and who can be counted on to oversee every crucial aspect of benefits decisions and use.  Corporate liability concerns dictate that HR folks cannot assume this role. They don’t have the training or the licensing for it. As acknowledged by the Pension Protection Act of 2006, regulators have begun to help employers avoid liability and provide advice. The Internet, complimented by telephone, has made it possible to deliver professional advice to everyone in the workplace.

The recently-completed Greenberg Traurig (GT) pilot, delivered by Myfinancialadvice in collaboration with United’s Definity Health Division using United’s Exante Bank HSA was a home run for Myfinancialadvice, demonstrating the effectiveness of this approach.  GT’s complex medical plan choices, complicated by personal financial planning issues enmeshed in sophisticated tax, investment and retirement planning concerns concentrated the need for coaching and advice in adoption and use. MFA delivered personalized coaching/advice sessions to a complex, sophisticated workplace in 31 office locations across the country during a ten day Open Enrollment period. Consumer Driven Healthcare (CDH) has a huge economic driver that spurs its use and creates active demand for the Myfinancialadvice service. The selection of a CDH medical plan reduces premiums for the employee and the employer. CDH features High Deductible health plans accompanied by Health Savings Accounts from which employees draw the cash needed to pay the higher deductibles for claims. According to Meredith Baratz, VP of Market Solutions for United Health Group’s Definity Health Division “As HSA balances grow, the proportion of account holders that behave like investors is increasing. There will be a need for education and financial advice that continues to connect those dollars to future individual health needs and planning,” she says. “Personalization of outreach, communication, interventions will continue to get even more specific and individually relevant with the goal of driving behavior change.”

To consumers, healthcare and wealthcare are now linked. Both are pots of personal money that need planning and managing. Both the retirement pot and the healthcare pot must be funded properly, properly invested, protected from taxes, protected from risk of loss. Both compete for scarce resources with all other life needs. Although some believe that future retirement security and all health needs can be met by government programs, the approach is naïve and impractical on its face. The expense of both retirement income and healthcare requires enormous resources. It will require money from all sources, private and public. In every scenario, the future is sure to bring more complexity and demand for expert advice to properly navigate this maze, in increasingly coordinated ways.

In the last three decades, increasing complexity has been the rule, not the exception. For the average person, assistance for decision-making will be a required and growing aspect of financial security for everyone, not just the wealthy. Coaching and advice for this purpose will be delivered by Myfinancialadvice and its imitators using the web. There is no other effective way.

Myfinancialadvice delivers comprehensive financial advisors, in person, wherever they are needed whenever they are needed, virtually.  With packaging of component advice sessions and certification of advisors on the specifics of individual employers’ benefits, MFA can provide the help workers need. Successful MFA deployments have demonstrated over the last fourteen months that MFA can deliver effectively and scaleably through the web. MFA has attracted the support of major benefits consulting firms, major carriers, major employers and the professional associations whose advisors will populate consumer deployments.  The testing is over. It is time to ramp and help everyone. There is no reason to tiptoe any longer.

This entry was posted on Thursday, December 4th, 2008 at 5:02 pm and is filed under Kevin Condon. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.