The Next Big Product in Financial Services Has Arrived - Part One

The hottest new benefit: paying off employee student loan debt

A new benefit is slowly being instituted by large organizations in the U.S.; this could be the next big product Financial Advisors can show their corporate clients as well as law firms and other groups. The adoption of this benefit is being driven by the generational shift in the working population. According to the Pew Research Center, Millennials (defined as those between ages 21 to 36 in 2017) are now the largest generation in the workforce. [1] Their biggest issue: student debt.

Average student loan debt of $30,000 for Class of 2018

In 2018, 70 percent of college students who put on cap and gown, walked across the stage and received their diplomas also walked off the stage with average student loans outstanding of $30,000. With the graduation of the class of 2018, forty-four million Americans, or 30% of all adults, are now saddled with debts accumulated to pay higher education expenses. Added together, these forty-four million Americans owe an average of $37,000 on student loans. [2] 

The Best Way to Retain Millennial Talent

The Millennials are the up and coming generation who will become the new senior executives and the newest talented employees in corporate America and different levels of government. But they change jobs more than other generations did, and keeping them is a major issue for employers.

Help them pay off their student loans

If an employee leaves after a firm has spent time and money training that person, this is a drain on the most important resource any corporation or other entity has: their employees. Presently, organizations of every type must do everything possible to retain their Millennial talent. The best way to do this? By helping them pay off their student loans.

The Newest Corporate Benefit

Assistance to employees to pay off their student debt is the newest benefit corporations are slowly adopting to attract Millennial talent, and it is highly desirable.  Fidelity has created a program that can provide up to $10,000 to an employee to help with paying their student debt. The program is having the exact effect everyone had hoped for. 

Participants Stay With Company Longer

“Those who participate also stay a lot longer at the company,” says Asha Srikantiah, a vice president at Fidelity. "For us, really focusing on retaining those people, especially after we've invested in training them, is a really important thing," she says.  [3]

The success of this program internally, caused Fidelity to create a turn-key program that corporations can adopt from Fidelity while Fidelity does all the work. [4] (Cannon does not endorse or recommend any financial services firm, product or service. This is used solely as an example). Other large financial firms are rolling out similar products that resemble QRPs in their set up. We will drill down on these programs in the next article.

Society Turning to Private Sector to Solve Societal Changes

We have written extensively about Larry Fink, Chairman and CEO of BlackRock, and the challenges to corporations he issues in his annual letter to the CEOs of the largest 250 public corporations in the world. In 2018, he wrote that governments are failing to address many critical social issues. “As a result, society increasingly is turning to the private sector and asking companies to respond to broader societal changes.” [5] New corporate benefits that assist employees in paying off their student loan debts are exactly the types of actions Fink is talking about.

“Nothing is more powerful than an idea whose time has come,” wrote French author and philosopher Victor Hugo. And this is definitely an idea whose time has come.

Resource(s):

[1] https://www.pewresearch.org/fact-tank/2018/04/11/millennials-largest-generation-us-labor-force/

[2] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/StudentLoans_infographic.pdf

[3] https://www.npr.org/2019/02/25/696355143/come-work-for-us-well-help-pay-down-your-student-loans

[4] https://www.fidelity.com/about-fidelity/employer-services/fidelitys-student-debt-employer-contribution-program

[5] https://www.blackrock.com/corporate/about-us/leadership

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Contributing Writer: Subject Matter Expert Charles McCain