Implementing 'personal balance sheet' key to diversified retirement portfolio

Moshe Milevsky urges advisers to add human capital to the equation

Investment News
By Mark Bruno April 5, 2009, 6:01 AM EST
Financial advisers need to begin re-evaluating traditional portfolio construction techniques, and they can start by measuring an individual's "human capital" if they want to create truly diversified retirement portfolios for their clients.
Admittedly, it is an abstract concept for many advisers, said Moshe Milevsky, associate professor of finance at York University in Toronto, …
Only after this value is ascertained will advisers have a complete picture of a client's potential assets and liabilities, "and then they can start considering ways to allocate their financial capital and meet their long-term liabilities," he said. …
[Jeffrey Gitterman, founder and chief executive of Gitterman & Associates LLC, a financial planning firm in Woodbridge, N.J., and the author of "Beyond Success: Redefining the Meaning of Prosperity" (Amacom Books, 2009)] noted that by calculating a client's human capital, an adviser can clearly show an individual just how much of his or her total capital is directly aligned with his or her job.
"If the next 30 years of your income could come from one company, in one specific sector, you have to start thinking about ways to hedge against that," he said. "That's the only way to really be diversified."
Photo by arnoldadler.com
Moshe Milevsky: Advisers need to put more emphasis on clients' current and future earning power.
CAREER WEALTH
Mr. Milevsky pointed to the examples of firms in the financial services sector that have either disappeared altogether or declined significantly in value during the last year. Many of the executives and rank-and-filers at these companies had significant portions of their personal wealth tied to their firms — wealth that has now essentially vanished.
In such a case, when a client is in a particularly volatile line of work and his or her net worth is concentrated in that industry, advisers should suggest that they place the vast majority of their tangible assets in stable investment vehicles, such as fixed income. …
Their actual assets, or financial capital, should be used to balance out any of the risks to their human capital, he said. This strategy is designed to generate consistent and somewhat predictable returns.
At the same time, a client in a steady profession with little career risk — a teacher, for example — has "bond-like human capital," Mr. Milevsky said. He suggested that this client's assets be invested entirely in equities, at least at first.
"Over time, our human capital decreases and we're forced to rely more on our financial capital as a result," Mr. Milevsky said "That must be accounted for early on in the process."
E-mail Mark Bruno at mbruno@investmentnews.com.

Four Simple Ways to Make Your Employees Happier

HarvardBusiness.org

Anthony Tjan

11:23 AM Tuesday July 21, 2009

There is a very simple secret to long-term employee loyalty and retention and it is not money, perks, or stock options. It's giving them meaningful roles.

This is not an idealistic motherhood-and-apple pie dream, but rather a basic condition of human behavior and psychology that many businesses and leaders often forget: people are driven as much or more by intrinsic meaning as they are by extrinsic rewards. …

…It comes down to balancing the intrinsic with the extrinsic rewards. The former is the heart and soul of an organization and a person's reason for working there. The latter is the practical mind and wallet. Here are four design points towards unlocking the secret of long-term employee loyalty:

1. Help her create a meaningful role. Ask in an interview what she would be doing if she had all the money she needed; explain and remind the employee why her role is critical and how it fits into the bigger picture. This is the foundation and most critical component of long-term retention.
2. Give feedback. Do so regularly, with both honesty and thoughtfulness.
3. Offer professional development. Keep her larger career path in mind; ask what she wants most to learn. People want to know where they are heading and that you care in helping them get there.
4. Say thank you. This means both intrinsic and extrinsic recognition — that is, reaffirm your appreciation for their role (a simple hand-written note or verbal thanks from time to time goes a long way) and pay them fairly.

Making people happy at their jobs is not as hard as it seems.

Majority of Sponsors Don't Know What SPDs Cost Them

PLANSPONSOR.COM

July 28, 2009 (PLANSPONSOR.com) – Eighty-five percent of human resources managers surveyed by HighRoads, a provider of summary plan descriptions, consider SPDs to be both compliance and communications documents.

However, according to the press release, the study found that as many as 65% of those not using SPD management technology do not know how much it costs to create, store and distribute SPDs in their organization.

Of the 200 HR managers surveyed, 74% expect to update their SPDs and 77% expect to streamline their SPD process within the next year. …

The press release said half of respondents are still issuing Summaries of Material Modifications (SMMs) whenever they have a change to their benefits, but 20% are reissuing SPDs instead.

HighRoads found that companies are moving to electronic distribution, with 75% distributing SPDs to employees either entirely online or both online or on paper. However, only 45% of respondents have gone entirely electronic, with 35% of respondents citing lack of participant access to a computer as the reason they could not eliminate paper.

… A third of respondents indicated that they would like to shift to predominantly electronic distribution within the next year.

Rebecca Moore editors@plansponsor.com

Paying employees to lose weight

Employee Benefit News

By Kathleen Koster

July 28, 2009

Employers are upping the ante to their wellness programs as the average cash incentive has increased from $204 in 2008 to $329 in 2009, finds a recent study on incentives in corporate wellness programs.

The study, an online survey, involved 372 small, medium and large U.S. companies employing 1.8 million workers.

The value of incentives range from $1 per pound for weight loss to annual premium reductions, the most commonly used incentive, valued at more than $1,500. …

Smaller companies may have limited resources compared to their larger counterparts, but that doesn’t mean they’re skimping on health incentives. …[Some] organizations with as few as 210 employees are offering incentives valued at $1,450 per year, well above average, the study found.

Companies of all sizes are further including spouses and dependents into the fitness fold, with more than half of the 372 companies interviewed offering wellness or disease management benefits to spouses and dependents.

In addition, two out of three companies offer a health risk assessment to employees, and nearly three out of four of those have set up incentives, which range up to $300 annually, with approximately 10% to 15% exceeding $300.

“… Employers are taking control of health care costs by creating smart, effective new strategies to keep employees healthy, and to keep employees at work,” says Katherine H. Capps, president of Health2 Resources, a Virginia-based health communication firm that sponsored the study with the National Association of Manufacturers.

Moreover, employers are measuring the results from these programs with greater consistency and are finding promising results. In 2007, only 14% of employers measured the ROI of these programs, but two years later 73% are monitoring their results.

Of those measuring, 83% say the programs return better than 1:1 on their investment. …

Study: Obesity accounts for 9.1% of medical spending

South Florida Business Journal

The price of that burger and fries is not only impacting Americans’ waistlines, but also is taking a huge toll on health care spending.

In fact, spending on conditions associated with obesity, such as diabetes, has doubled in the last decade, as obesity rates grew 37 percent between 1998 and 2006, according to a study published Monday.

Obesity now accounts for 9.1 percent of all medical spending, up from 6.5 percent in 1998.

The report found that per-capita medical spending for obese people was 42 percent – or $1,429 – higher per year than for someone of normal weight.

Spending on prescription drugs was the largest cost driver. Costs on prescription drugs for an obese Medicare beneficiary was $600 more per year than for prescriptions used by a normal-weight beneficiary, according to the study.

“The medical costs attributable to obesity are almost entirely a result of costs generated from treating the diseases that obesity promotes,” said the study’s lead author, Eric Finkelstein, director of the North Carolina-based RTI’s Public Health Economics Program, in a news release.

The U.S. Centers for Disease Control is discussing the study’s findings, along with new recommendations designed to prevent and reduce the impact obesity has upon communities at the “Weight of the Nation” conference, a three-day meeting of public health experts, policy leaders, and researchers being held this week in Washington, D.C.