Financial pointers for the 99%

When Liz Davidson told friends 15 years ago that she was quitting her job running a hedge fund, they thought she was misguided.

Then Davidson revealed her new career plan, and they thought she was really nuts.

She launched a company that gives financial guidance to average Americans through their jobs. Employers hire Financial Finesse Inc. to provide group workshops and one-on-one counseling to workers on topics such as debt management, college savings and elder care.

It was a noble goal but a long shot.

Most employers offered only bare-bones advice on 401(k) plans, much of it online to limit expenses. It was unclear whether companies would pay for broader education, especially more costly personalized guidance from financial planners.

“Everyone thought I was insane,” Davidson said. “People didn’t understand the business because there was nothing really like it. How could there be demand for a business that people didn’t really understand?”

Today, the El Segundo company has more than 500 clients around the country, including Aetna, Nestle and the NFL Players Assn. Financial Finesse is profitable and has experienced its best growth in the last three years, Davidson said.

Having employers pay for planning services is still a fairly new concept, with only a few companies in the field. But experts say the workplace-based model has the potential to improve the sometimes dreary finances of regular Americans.

“It may be the one best mechanism for reaching the mass market in an efficient way, the most effective way,” said Sheryl Garrett, head of a national network of fee-based planners.

Davidson’s company has benefited from the concern among some companies that employee financial troubles could detract from the corporate bottom line.

Financial stress can lead to absenteeism or increased medical costs. And employers don’t want workers with inadequate retirement savings to stay on the job solely for a paycheck.

“Everyone knows the person in the office who’s financially stressed,” said Annette Grabow, retirement benefits manager at M.A. Mortenson Co., a Minneapolis construction company. “They’re on the phone half the day, with either family members or debt collectors, trying to straighten out and fix [their finances], and they’re not productive.”

The growth of Financial Finesse is a tacit acknowledgment of the deep gaps in Americans’ financial literacy.

Repeated studies have shown that many people lack even a rudimentary understanding of personal finance and investing. Vast numbers of Americans are mired in debt or have meager retirement savings.

Various financial-services companies over the years have tried to bite off pieces of the advice business, typically with limited ambition and success.

Plenty of advisors fawn over wealthy people. But it’s hard for middle-class and even upper-middle-class people to find knowledgeable and trustworthy assistance.

One study found that middle-income people often distrust financial advisors and don’t even realize that they should seek help.

Many advisors who hold themselves out as financial experts have spotty training and undisclosed conflicts of interest, critics say. Some brokers, for example, recommend investments that pay them high commissions rather than what’s best for clients.

Consumers who look hard enough can find skilled and objective financial advice, but it doesn’t come cheaply. Depending on the services, financial planners can charge several hundred to several thousand dollars.

Many consumers are unwilling or unable to shell that out.

“There’s clearly a huge need for the middle class and the masses to have access to financial planners, but they have trouble finding advisors,” said Michael Kitces, research director at Pinnacle Advisory Group in Maryland, who writes a planning industry blog. “And there are huge numbers of advisors who want to serve the middle class but they can’t get enough clients to make it work.”

Davidson, 42, a Palos Verdes native, understood the obstacles when she started out. But she preferred that to running her small San Francisco hedge fund.

“Helping the rich become richer is not necessarily the most satisfying thing,” Davidson said. “Even if we had a good quarter, no one ever said, ‘Thank you. My life is better because of you.’”

Davidson, who graduated from UCLA’s Anderson School of Management in 1997, got the idea for the company after doing informational seminars for friends. She realized that even well-educated people were often clueless about their finances.

Her financial planners don’t recommend specific investments. Instead, they give personalized guidance over the phone or in person, typically to any employee on any subject, as often as needed. (Some employers sign up only for annual seminars, though most pay for unlimited financial coaching of workers over the phone.)

Financial Finesse is paid by employers — individuals can’t even hire the company directly. To eliminate conflicts of interest, Davidson’s planners don’t sell financial products or get commissions.

The objectivity appealed to the NFL Players Assn., which wanted advice for its members, often retired players navigating post-career finances.

“It’s great to have a place where a player can have a second set of eyes,” said Dana Hammonds, the union’s director of player

affairs and development. “They say, ‘I’m going in to meet with my [financial] advisor on Monday. What should I ask?’ or ‘My statement doesn’t look right. Can you help me?’”

Workers at other companies have sought advice for a variety of needs.

Through her employer, Michelle Sirois got a planner to help her through a divorce. She got guidance on budgeting, mortgage issues and taxes to ensure that she could maintain her house on a single income.

“I certainly could have researched it myself, but there are only so many hours in the day,” said Sirois, 43, an actuarial consultant at Aetna, the insurance giant.

At M.A. Mortenson, the construction firm, Jennifer Mukhtiar attended workshops on estate planning and mid-career financial needs. She immediately noticed the difference from the boilerplate 401(k) presentations at past employers.

“Early in my career I remember the typical black-and-white slides of ‘If you invest $10,000 today here’s how much it will be worth at retirement,’” said Mukhtiar, 47. “It was ‘OK, fill out this paperwork and here’s how you sign up and it’s up to you.’”

Still, the biggest challenge, experts say, is convincing employers that improving workers’ finances improves the bottom line.

Even as some companies have moved to assist workers, others have gone the opposite way.

AOL Inc., for example, now matches 401(k) contributions only at the end of the year, rather than every pay period. That saves the cost of making contributions to workers who leave the company midyear.

“The hard part is getting enough companies to have faith that this does benefit their employees and it’s worth the investment,” Garrett said.

Davidson is optimistic.

“Companies are recognizing that they have to provide support,” she said. “The cost of not providing support, in terms of the impact of financial stress on employees and delayed retirement, can be a major cost.”

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