It's no secret that Financial Wellness programs have been rising in popularity for quite some time. There has been an increasing awareness on the part of employers to invest time, energy, and resources into ensuring that employees are financially stable. Historically though, the focus has heavily centered almost solely on retirement planning. Retirement readiness projections, savings rates, and automatic enrollment seem to have been what has primarily been on the minds of Human Resource professionals when it comes to employees' financial lives.
This begs the question: Are we contributing to the financial "un-wellness" of employees by putting such a heavy focus on retirement planning? Furthermore, are HR executives the most fitting to help people with these areas of their financial lives?
Over the years, the responsibility to save for retirement has shifted from being wholly on the employer, to the employee needing to take more of the initiative to think about their long-term future. In a recent piece, Liz Davidson of Financial Finesse points out that,
"A good job meant access to a secure retirement income they could not outlive. Employers took center stage, assuming most of the financial risk of funding that retirement with employees largely removed from the process. Today, employers are far more likely to be facilitators of retirement saving, playing a critical supporting role while the employee is the star planner of the retirement show."
That is not to say that HR departments have an easy road when it comes to implementing, managing, and encouraging employees to save into a 401(k), 403(b) or other employer-sponsored retirement plan. There is, however complex, a somewhat formulaic road to success: high participation rates, high savings rates, low withdrawal rates and employees will be provided a stable retirement. What about the rest of their finances? Even if an employee is maxing out their retirement plan contribution, it does not mean they don't have mountains of credit card or student loan debt to overcome, have adequate emergency savings, or are overextending themselves due to lack of financial guidance.
We spoke on how financial stress can impact an employee's work life previously here, but it begs mentioning again given that 60% of workers report feeling financially stressed and 55% want help managing their finances. With rising debt, increased cost of living, and the necessity of saving for retirement on the individual, it becomes more and more apparent that the average American is not given the tools they need to adequately manage their financial life. So, what's the answer?
According to a recent study, 56% of employers indicated they are very likely to create or focus on the financial well-being of employees in ways that expand beyond retirement decisions in 2016. Former Advisor and Certified Behavior Financial Analyst Daniel Haverkos emphasizes:
"Financial Wellness (FW) has little to do with the level at which someone has been auto-enrolled into their 401(k) plan. It comes down to your financial decision making in the past, the present, and in the days to come. How much someone has been able to set aside, and protect, for a rainy day, while paying down higher interest rate debt, and ultimately taking advantage of compounding earnings via longer-term investment vehicles. This can better define the well-being of a person's financial affairs."
There's an interesting phenomenon growing that creates new personal and professional challenges for Human Resources leadership. As HR teams across the country continue to spearhead innovative benefits offerings that help bridge the gap for their valued employees, the Financial Wellness trend is unfortunately posing a unique disconnect.
The talented individuals who are overseeing the work of HR departments around the country tend to have one fairly obvious trait in common: They're all focused on and gifted in their ability to relate and interact with people. Unfortunately, because one benefit (retirement savings) has historically been placed in the spotlight for HR leadership and team members, handling the ever growing emphasis on personal finance is challenging. As employers are called on to provide more resources and training in the world of FW to find and keep the best and brightest employees, HR members are finding themselves in unchartered territory: Being in the same exact boat as employees when it comes to needing financial guidance.
The reason that FW has even risen in popularity is that inherently, money and finance are not easy to navigate without help. Our education system is not set up to impart knowledge on these subject matters and most people find anything financial-related intimidating. This is why financial professionals experts exist and it is unrealistic to expect those trained in Human Resources and employee benefits to become financial experts overnight in order to embrace the growing FW trend as most of them are experiencing the same issues and challenges as the employees with whom they work.
Part of our service offering includes providing one-on-one consultations with employees to help them save enough for retirement and pinpoint any other areas they may be struggling with, and those in HR who are responsible for managing FW programs, are also just as likely to be using this benefit to help them through paying off credit card debt, building emergency savings, getting help buying a home, or any other common financial hurdle.
As more tools, resources, and education continue to be developed around FW concepts, it can become critical for HR team members to embrace these ideas on behalf of their employees. Of course, there is a reason financial professionals exist and it is unrealistic to expect those untrained in that field, such as HR professionals, to provide sufficient guidance to employees on financial matters.
The ripple effect of an engaged HR team regarding FW integration can have profound results. If HR is asking their staff to take a vulnerable step forward to have a hand in creating a company culture embodying Financial Wellness, they must be willing to lead by example. We realize that there is an inherent contradiction that goes along when those that are supposed to be providing adequate help and resources are also the ones to seek assistance within their own personal finance journey. This is why teaming up with a third-party vendor to create and execute an FW that fits you and your employees' needs is important.
Some of the greatest corporate FW success stories that our firm has witnessed over the past several years have begun with the humble statement, "I'm having some trouble with my money, and I need some help." This attitude sets the tone moving forward so that your FW may be successful. As with most benefit offerings, if employees see that upper management and HR is supportive of the initiative they will be more likely to embrace it and in this case, take a positive step forward to get their financial lives on track.