By Cyril Tuohy
There’s a big opportunity opening up for financial advisors as employers turn to voluntary benefits and services, and as younger generations of employees gravitate toward customized benefits packages, a new study finds.
Health care reform is only going to accelerate the opportunity for advisors as employers review their overlapping offerings, retool packages and readjust their total rewards to suit Gen Xers progressively moving into the senior ranks of the workplace, said Beth Grellner, a health and group benefits expert at Towers Watson.
“As voluntary benefits and services gain in popularity, employers are told what they think employees want, but it doesn’t necessarily make sense with what they have in place,” Grellner said.
Examples abound: for instance, a voluntary dental benefits plan offered by a company that already has a primary medical and dental plan. Employers offer these overlapping benefits more frequently than you might think, she said.
Employers “don't know what they don't know,” she said, so any company that can lean on a trusted advisor is going to find that advisory function valuable, she said.
The opportunity for advisors was reinforced by a survey released last week by TowersWatson that found 21 percent of employers this year are planning to re-examine voluntary benefits as part of their total reward package, and 48 percent of companies expecting to re-examine voluntary offerings in 2018, when health care reform excise taxes kick in on high-cost health plans.
The 2013 Voluntary Benefits and Services Survey collected data online from March to April from 320 employee benefits professionals from midsize to large companies across eight industry categories, TowersWatson said.
Grellner said employers typically fall into one of three groups: those with no interest in voluntary benefits, those who have an interest but lack information and are in need of guidance from a financial advisor, and employers with voluntary benefits in place but with no clear idea of why or how the benefits even got there in the first place.
Employers in the third group, she said, often are looking for a future strategy with which to navigate the voluntary benefits marketplace. Advisors have a key role to pay in guiding employers that belong in two of the three groups, Grellner said.
“There are new products and options coming into the marketplace all the time,” Grellner said in an interview with InsuranceNewsNet. “New carriers are getting into this space and health and accident plans are getting into voluntary benefits and services because the coverage gaps are impacting more and more people.”
The current state of transition in the voluntary benefits space has some similarities with the transition from defined benefits to defined contribution retirement plans that took place more than a generation ago as employees were asked – indeed forced – to take on more of their retirement responsibilities and decisions themselves, Grellner said.
But as companies have seen with defined contribution plans, employees are not that astute at selecting the right funds. Many employees are too conservative with investing early in life, when they can afford to take the most risk because they have the longest time horizon.
So it is with voluntary benefits that employees – without the proper guidance – could perhaps end up “insurance poor” for a risk that is relatively common, overinsured for a risk that is rare, or even doubly insured for other risks.
The way employees access information is also changing, Grellner said. Baby boomers were happy being “taught” about benefits by a corporate human resources specialist. Gen Xers are more interested in getting the information, studying it, and then making a decision on their own. Gen Yers care for neither, and prefer shopping online with many choices and are prone to placing a lot of weight on what their peers have approved or liked.
“They have so many more options and access to so much more information that is has helped voluntary benefits and services to get creative,” she said.
Companies will get creative, according to survey results, as baby boomers retire in larger numbers in the next 10 years and as voluntary benefits plans are redesigned for younger generations who are attracted to customized benefit packages.
Voluntary benefits can be broken down into four different categories, the TowersWatson report also found: health, wealth accumulation, security and personal interests, and one weak spot was the lack of employee engagement and communication among employers.
Only 23 percent of respondents indicated they had a year-round communications strategy promoting the value of voluntary benefits and services. Inadequate communication might limit participation in voluntary benefits programs, and communicating those benefits to workers is yet another window of opportunity for advisors.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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