Plan Sponsors can help employees find information about their investments by hosting generic workshops, either through videos or interactive training materials, or by posting sample documents with information about where to find those documents. By empowering employees to do more research, those employees may find that investment in retirement seems less capricious and more within their capacity to follow.
Recently, the Securities Exchange Commission has made a series of regulatory changes and proposals to make it easier for investors to get information and reports from publicly traded companies. With access to information getting easier, it may be worthwhile for employees to know where to look to find the best financial information about companies and funds.
While most employees may know to look to a company’s reports on profits and losses, they may not understand where to find information about profit margins and other details that could help show profit trends or provide useful information to compare one company to another. This could be especially important in virtual or social media based businesses. For example, concepts like cash flow and customer acquisition cost (sometimes referred to as user costs) may be of interest to employees looking to have a greater understanding of the companies in their portfolios and funds. Cash flow metrics let investors understand how much of a company’s earnings are tied up in servicing debt or overhead, and can signal that the company isn’t keeping pace with it’s strategies (or that it is expanding too quickly). Customer, or user, acquisition costs can help compare two disparate companies to see how much growth in consumer’s costs.
But where do investors find these key data points? Most employees will want to get the information they want out of financial statements. Which financial statements? Usually, the key information is in the balance sheet, income statement and other accounting documents. But while the accounting documents will cover current and projected numbers, the potential unexpected information, or “known unknowns”, may be the key to understanding a company’s potential financial progress. This means, to find the best financial information, employees and investors may want to first understand the characteristics of the financial statements before focusing on an individual corporations specific financials.
Which financial statements should an employee or investor look to? The balance sheet, income statement and cash flow statement are usually mentioned as to “go to”s for most consumer advocates.
And even more so, they’ll want information contained in the footnotes and longer written portions of the financial statements.Understanding the key elements of what a company does is critical for comparison purposes. These longer written portions provide information on the company’s industry and market. This information, say some analysts, is more important than spreadsheets for most novice investors. That is because accounting is an art, not a science.
Accountants, and those who help them prepare financial statements, have to incorporate in a replicable manner, the company’s estimates, projections and judgments. That means that financial statements, even from highly ethical companies, are prone to imprecision. The management’s judgments will reflect information about the industry and market, and without other detailed information, information in financial statements could be incomplete. Where can an employee or investor find the more nuanced information? Usually in the notes to financial statements, sometimes prepared by auditors. Sometimes this information appears as footnotes.
Where else can investors or employees find longer discussions about a company’s financial progress? Some financial educators suggest looking at a company’s SEC reports, such as 10-Ks or Annual Reports or 8-Ks or notices of major events. Many companies post these reports on their websites for their investors or future investors to find. These documents can be surprisingly long and detailed, yet are required to have a section concerning management’s discussion.
Plan Sponsors can help employees find information about their investments by hosting generic workshops, either through videos or interactive training materials, or by posting sample documents with information about where to find those documents. By empowering employees to do more research, those employees may find that investment in retirement seems less capricious and more within their capacity to follow.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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