Aid Package

Panicked employees who are worried about the diminishing values of their 401(k)s don't do much for a company's morale. While it's impossible for an entrepreneur to reverse the impact of a bear market, you can help your employees position their portfolios to get better long-term results.

Many business owners have stepped in to help employees get the most from their retirement plans. Whether it's providing free or low-cost access to independent financial advisors, hosting in-house investment seminars or circulating financial planning resource lists on the company intranet, making an effort to help participants in your company's retirement plan goes a long way to restore confidence in what has become a key compensation perk at small businesses.

Federal rules limit just how far you can go with employer assistance. Specifically recommending a stock, bond or mutual fund is verboten, and your suggestions could raise liability issues if the investment tanks. That's where independent third parties come in. Insurance companies and brokerages are happy to provide speakers to discuss general investment strategies with your employees, often at no charge. Many 401(k) plan administrators now offer automated financial advice tools that provide portfolio check-ups and help employees correct any misguided investment strategies they've undertaken. "The mistakes people make are not saving enough, not participating in the plan or not taking full advantage of the plan," says Christopher Jones, executive vice president at Financial Engines Inc., an automated advice provider in Palo Alto, California. "People are also not good at managing risk."

There aren't any legal requirements in place that force employers to provide investment advice, but companies that make such services available stand to gain more than just the satisfaction of safeguarding their employees' nest eggs. "If you want to differentiate yourself as an employer of choice, these services show you'll go the extra mile," says Brent Longnecker, president of Resources Consulting Group in Houston and an expert in employee compensation.

Financial planning assistance not only helps build employee loyalty--it also provides a forum through which employers are able to address rising fears about corporate malfeasance.

Scott Gessay, president and founder of FGM Inc., a software development company in Dulles, Virginia, hired a financial services company to help his employees develop strategies for making better investment choices. Meanwhile, he tried to help employees understand that FGM is a private company and that it's easier to resist the temptation to cook the books at a private company than it is at a public one like Enron or WorldCom where executives face the pressure of meeting quarterly analyst expectations. Says Gessay, "We make sure our employees know we drive for long-term gains."