Q&A: Merrill Lynch advisor finds employer interest in retirement plan education growing

The Washington area has a large number of affluent residents -- people with income of $250,000 or more. Merrill Lynch Wealth Management recently surveyed a sampling of these individuals for its Affluent Insights Quarterly report, gauging the values and financial priorities of this group. Chief among the concerns of well-off Washingtonians was the recession's impact on their ability to achieve financial goals. Bill Moran, a financial advisor in the D.C. office of Merrill Lynch Wealth Management, spoke to Capital Business about ways employers can help quell financial fears.

How can employers support the financial well-being of their employees?

When you look at the report, retirement is a top concern. There are a number of professionals in my field who are willing to come in and do ... [an] educational program, without schlepping product. I know employers are always concerned -- 'Oh, is this is going to be a sales presentation?' So maybe they can set up a panel and say, 'You are not going to be the only one in here. It's going to be you, an independent person and somebody else from one of your competitors.' And just have them talk about macro-retirement planning that employees would have an interest in.

Are you finding more employers in the Washington area engaging in such sessions since the recession?

The good ones have. The good ones have strong human resources departments that are reaching out with more frequency to their financial providers. We've always offered that to different people who were providing the 401(k) or 403(b) plans. When things are really good they may say, 'I don't know if we really need to have you come in.' Now they are saying, 'How soon can you come in?' Part of it is that the HR department has their own money invested in these programs as well, and they've probably got their own natural curiosity about how to better their situation.

What can investors do to make the most of their employer-sponsored benefits?

There are a lot of people, roughly 20-plus percent, that are not fully participating in the 401(k) plan. They are contributing, but they are not maxing out. We spend a lot of time sitting down with people saying, 'Okay, to go from 0 to 15 percent might seem like a really huge bite for you to do. But once you look at your budgeting and work to come up with a number, maybe it's 6 percent, you can decide that every six months we are going to increase that by one more percentage point.' That's really not going to have much of an impact on your current quality of life. You learn to live within your means. And before you know it, you've gone from 6 percent to 10 percent. That's pretty powerful.

A lot of times if I'm working with employers on defining a new retirement plan, they may say they want to offer a match component and are willing to match up to 3 percent. I will say, 'That's great, but you might be able to have a greater impact by saying you'll do 50 percent to the first 6 percent.' For the employer, it's the same dollars they are putting into the plan when you think about the math, but it's encouraging employees to contribute more than just 3 percent.

What trends, if any, are you noticing in terms of how employers in the Washington area are approaching benefits for their employees?

Employers are really recognizing that you've got to offer a great package if you want to keep employee loyalty, which I think most employers really do want to do, at least the people I'm working with.

Many respondents to the survey were concerned about maintaining their standard of living. Are you finding that many of your clients are struggling to pull back in order to focus on long-term goals?

Most of the affluent clients we are working with are living within their means. They're not overextending themselves, but they are also recognizing that 20-plus percent compounded year after year is not the norm. So you might want to be a little more prudent with some of your spending, recognizing that to anticipate that kind of compounded growth rate on an ongoing basis is pretty unrealistic. You are probably finding some people pulling back because they don't want to alter so much of their goal-based planning. You can still keep living the high life. But during periods of pullback, you've got to recognize that that money is not going to be compounding, so you'll have to work longer.