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Karie M. OConnor,
CIMA®, CPFA®, AIFA®, QKA®

Director – Institutional Advisory Services

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Jeffrey P. DeHaan, CFP®

Managing Partner – Private Wealth Management

Navigating Employee Financial Education Amidst a Changing Workforce and Increased Regulatory Requirements

Karie M. OConnor Kevin G. Carani June 01, 2024

In last month’s Fiduciary Corner, we underscored the critical importance of Employee Financial Education Resources. Building upon this imperative, this month’s Fiduciary Corner delves into emerging trends, employer obligations, and recent legislative developments poised to impact employer-sponsored financial education programs, with legislation passed in late April that will take effect this September.

Addressing the Retirement Outcomes Concern:

Recent studies underscore a paramount concern among those who sponsor retirement plans for their employees: Retirement Outcomes. Employers are increasingly focused on whether their employees will amass sufficient assets to sustain their lifestyles throughout retirement. Employers are tuned in to their overall benefits package’s role in retention, talent acquisition, productivity, corporate reputation, and the impact on the cost of providing medical benefits as the employee population ages. This concern is echoed by employees themselves, with many expressing worry about their preparedness for retirement.

Meeting Employees Where They Are – Tailored Financial Education for Multigenerational Workforces:

Recognizing the diverse needs and preferences of today’s workforce, employers must tailor their financial education initiatives accordingly. From On Demand video content, financial wellness hubs, interactive workshops, to personalized coaching and planning sessions, employers should work with their advisors to employ a multifaceted approach to deliver relevant and actionable financial guidance. By providing more tailored financial education programs, employers can empower employees to make informed financial decisions, aimed at enhancing overall financial well-being.

Employers can foster a culture of financial wellness by consistently promoting financial education and offering incentives for participation. Management support is integral in encouraging employee engagement with financial education programs.

Integrating Financial Wellness into Employee Benefits:

In today’s post-pandemic landscape, employees prioritize benefits that support holistic well-being, including physical, mental, and financial health. Employers can achieve this by integrating financial wellness initiatives into their benefits programs alongside health and wellness offerings and flexible work arrangements. Implementing an integrated benefits program requires careful planning and collaboration amongst partners.

Assess and Modify:

Feedback mechanisms, such as surveys and overall participation and engagement are instrumental in gauging the effectiveness of financial education initiatives. Regular assessment ensures alignment with employees’ evolving needs, broader employer objectives, and allows for timely adjustments to education strategies.

Navigating Regulatory Changes:

The recent update to the fiduciary rule underscores the evolving regulatory landscape surrounding retirement savings.

One of the most significant developments in the landscape of employee financial education and retirement planning is the recent update to the fiduciary rule by the Department of Labor (DOL). This revision, set to take effect on September 23, 2024, marks a pivotal moment in ensuring the protection of retirement savers’ interests under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code.

The updated fiduciary rule aims to redefine the standards for investment advice fiduciaries, emphasizing the importance of providing prudent, loyal, and honest advice while mitigating conflicts of interest. While the rule builds upon the foundation established in 1975, it acknowledges the evolution of retirement and investment landscapes, particularly the prevalence of individual retirement accounts (IRAs) and 401(k) plans in today’s workforce.

Importantly, this rule emphasizes the fiduciary obligation of investment advisors to prioritize clients’ best interests over their own. While Registered Investment Advisers (RIAs), including Clearwater Capital Partners, have historically adhered to a fiduciary standard under the Investment Advisers Act of 1940, the new fiduciary rule extends similar obligations to a broader spectrum of financial service providers, including brokers.

Registered Investment Advisory Firms like Clearwater Capital Partners, by virtue of their existing fiduciary status, have long upheld a duty to act in the best interests of their clients. This includes providing personalized investment advice, avoiding conflicts of interest, and disclosing any potential conflicts or fees transparently. As such, the new fiduciary rule largely aligns with the standards already embraced by RIAs, reinforcing their commitment to client-centric practices.

However, the rule represents a significant shift for brokers, who were previously held to a less stringent suitability standard. Under this standard, brokers were not required to prioritize their clients’ best interests to the same degree as fiduciaries. With the implementation of the new fiduciary rule, brokers will be subject to heightened responsibilities, ensuring greater alignment with the fiduciary standards upheld by RIAs.

Additionally, the updated fiduciary rule aims to standardize the level of protection afforded to investors across all forms of investment advice related to retirement plans. By closing existing gaps in regulatory oversight, the rule seeks to enhance transparency, accountability, and investor confidence in the financial advisory landscape.

The revised fiduciary rule underscores the Department of Labor’s commitment to safeguarding the interests of retirement savers in an evolving financial landscape. By promoting fiduciary standards of care and transparency, the rule aims to empower investors with the tools and protections necessary to pursue their retirement goals with confidence and security.

Conclusion:

As employers navigate the complexities of employee financial education and benefits, a tailored and comprehensive approach is paramount. By working with your plan advisor, and continuing to prioritize financial wellness initiatives, employers can foster a supportive work environment that enhances employee satisfaction, retention, and overall well-being while attracting new employees focused on a total compensation package.


SAVE THE DATE: July, 25th, 12:00pm – 1:00pm CST
Cybersecurity and ERISA: Compliance & Protections

Join Clearwater Capital Partners for a Virtual Plan Sponsor Event and Discussion around Cybersecurity and ERISA: Compliance & Protections.  Leading this discussion includes guest speaker Lisa Van Fleet, Partner at BCLP Law, and Jason Wroblewski, Regional Vice President at Ascensus


$80,000 Raised – 2024 Charity Supercar Show

On Saturday, June 8th the Clearwater Capital Foundation hosted the 4th annual Charity Supercar Show. This event drew over 1200 spectators, 270 cars, and raised $80,000 for 3 local charities. Thank you to all who supported this event!

Karie M. OConnor

Kevin G. Carani

disclosure

THIS COMMENTARY HAS BEEN PREPARED BY CLEARWATER CAPITAL PARTNERS. THE OPINIONS VOICED IN THIS MATERIAL ARE FOR GENERAL INFORMATION ONLY AND ARE NOT INTENDED TO PROVIDE OR BE CONSTRUED AS PROVIDING LEGAL, ACCOUNTING, OR SPECIFIC INVESTMENT ADVICE OR RECOMMENDATIONS FOR ANY INDIVIDUAL. ALL ECONOMIC DATA IS DERIVED FROM PUBLIC SOURCES BELIEVED TO BE RELIABLE. TO DETERMINE WHICH INVESTMENTS MAY BE APPROPRIATE FOR YOU, PLEASE CONSULT WITH US PRIOR TO INVESTING. INVESTING INVOLVES RISK WHICH MAY INCLUDE LOSS OF PRINCIPAL.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities, insurance products, or to adopt any investment strategy. The opinions expressed are as of the date of writing and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Clearwater Capital Partners to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. S&P 500 is a registered trademark of Standard & Poor’s Financial Services, a division of S&P Global (“S&P”)  DOW JONES, DJ, DJIA and DOW JONES INDUSTRIAL AVERAGE are registered trademarks of Dow Jones Trademark Holdings (“Dow Jones”). The two main risks related to fixed-income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments.

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