Corporate downsizings are creating business for financial advisers, who are stepping in to help laid-off employees invest lump-sum retirement plan rollovers.
Many financial advisers volunteer to give educational seminars at a corporation in hopes of attracting individuals' retirement assets, which may range from about $100,000 to more than $3 million per employee.
While companies like McDonnell Douglas Corp. bring in a series of financial advisers throughout the year to speak about investment topics, others - such as United Parcel Service of America Inc. - bring in firms on a project basis, particularly to work with employees taking early retirement.
The problem, according to some experts, is that companies providing access to only one financial adviser risk liability in the event employees are hurt by relying on his or her advice.
Increasingly companies are bringing in more than one firm "for the same logic as why you give people six investment choices for their 401(k)," said Jane King, president of Fairfield Financial Advisors Ltd., Wellesley, Mass. She has conducted seminars alone or alongside other advisers for such companies as KLH, Framingham, Mass., and GTE Service Corp., Stamford, Conn.
Even when companies bring in multiple firms, there is concern the free advice is not objective because every firm's agenda is to sell its own services. For that reason, some companies prefer to pay financial educators, who aren't selling services to employees.
The Agfa division of Bayer Corp., Wilmington, Mass., has paid Harvard Financial Educators, Harvard, Mass., to provide investment seminars after business hours for several years. Dee Lee, principal of Harvard, gave up her financial planning practice five years ago to devote all her time to such seminars.
"Unisys was sued so a lot of companies are aware if they just set someone loose on employees they may be liable. So more companies are saying we'd rather pay someone," Ms. Lee said. She was referring to a federal appeals court decision that said employers cannot rely solely on the guidance of an investment consultant without reviewing a firm's data and supplementing it when necessary (Pensions & Investments, Jan. 22).
Philip Hartwell, principal of Hartwell Financial, Torrance, Calif., and branch manager of Royal Alliance Corp., a New York-based broker dealer, began providing seminars to downsized employees 12 years ago at Hughes Aircraft Co. Three years ago, Hughes asked him to give a three-week seminar to employees, culminating in a comprehensive financial plan developed for each participant. Some 75 individuals participated, but not all decided to accept Hughes' early retirement incentive upon completion.
Typically, employees aged 55 to 58 are given golden handshakes or years added to their years of service to enable them to qualify for earlier retirement benefits. Mr. Hartwell said companies assign him projects of this sort for 12 to 18 months.
Mr. Hartwell discusses tax and regulatory issues, investment basics, asset allocation and estate planning. He also might provide referrals to tax and estate attorneys and certified public accountants.
Richard B. Manchester, director of asset management of Worldwide Investment Network, Irvine, Calif., another affiliate of Royal Alliance, conducted a two-phase program for UPS.
First, he provided general financial planning seminars to Western regional managers within three years of retiring. In the last quarter of 1995, when the company had a large-scale downsizing nationwide, he conducted two-day workshops for the Western regional districts to those eligible for early retirement.
"Most people had never prepared or expected to be retired out in their 50s," Mr. Manchester said.
Steve Nielson, employee services manager at UPS, said when financial advisers speak to employees, "we just ask them to maintain a professional approach. We make it clear our organization doesn't endorse the firm or its advice. It's just food for thought."
Jan Golon, a spokeswoman for Chevron Corp., which invites financial advisers to speak at two-day seminars for retirees and laid-off employees, said the company is looking at making available to all employees "brown bag" lunch seminars on investing. The company probably would invite the same financial advisers to speak at the informal lunch talks. Ms. Golon said the idea is in line with the Department of Labor's campaign to educate employees on investing for the future.
Mr. Manchester said his downsizing-related business is booming since he began giving seminars five years ago. "It's been absolutely great for us.
"I would say we probably have $20 (million) to $30 million in assets directly attributable to the most recent seminars over the last year or two," said Mr. Manchester, who oversees $250 million.
"The most successful have been at UPS because in two days you really get to know them."
Advisers say much of their business flows in six months to a year after a seminar is given. For that reason, some advisers criticize competitors who actively follow up with employees after a seminar.
Fairfield's Ms. King said: "I never followed up. Some people did. I didn't feel that was appropriate.
"Layoffs, plant closings, early retirement - it's an enormously emotional time. You're probably not equipped to make a decision, which is another reason I don't want to call people up and say 'Are you ready?'*" Ms. King said.
Ms. King derives 30% of her $50 million financial advisory business from these downsizing-related projects without actively soliciting clients.
Mr. Manchester, who recommends employees interview at least three financial advisers before making a decision, said: "People who never made more than $60,000 a year now have to trust somebody with $1 million."
"Companies want employee education, not sales hype ..... to build up their company and transfer the concern the company has for the welfare of the employee as they're leaving," he added.
Ms. King said those giving seminars should remind downsized employees they might want to use the information to handle their own affairs, rather than retain any financial adviser.