While Financial Wellness seems to be one of the most popular trending topics among employee benefits and retirement plan professionals, how does this concept play into the big picture of overall "wellness"? In this New Frontier of Wellness series, AFS 401(k) Advisor, Alex Assaley uses his expertise and experience to explain how Financial Wellness programs are impacting people, why employers should consider them, and how to implement Financial Wellness for your own employees.
In Part I, Alex discusses what Financial Wellness really means, why it can be beneficial and what we've seen happen firsthand when employers embrace it.
The Reality of Financial Wellness
You can’t go a week, much less a day, without hearing about “wellness” in the workforce. Maybe you have even implemented a one-time or ongoing program that has been successful; but, it’s completely understandable to wonder: Is financial wellness a real thing? And, more so, what can it do for you, your organization, and your employees?
We agree that “financial wellness” is the hottest new buzzword being thrown around all reaches of the financial industry, with numerous definitions sometimes resulting in a misleading effort to sell something to you and your employees. So, let me start by declaring that we are big advocates for financial wellness – we have seen it in action and recognize the positive impact such a program can create.
With that in mind, it is important to create a baseline for what we believe a financial wellness program should be; it is actually pretty simple – building financial literacy and providing the tools and resources so an employee can make wise financial decisions for today, tomorrow, and their long-term future. That’s the definition we live by when both providing counsel, and delivering customized financial wellness programs for our clients.
Over the last couple of years, there has been exponential growth in the wellness space and a lot of valuable data on the success of wellness when it comes to your employee’s physical, psychological, and emotional health. Today, we are just starting to see the same trends and interest with respect to financial wellness. In fact, there have been several recent studies around this topic.
The commonly cited 2015 Aon Hewitt survey indicates that 93% of responding employers intend to increase focus on the financial well-being of their employees extending beyond retirement. Additionally, the Society for Human Resource Management's Financial Wellness in the Workplace Survey, cited that almost 4 out of 10 employees have more financial challenges now when compared to 2007 (prior to the Great Recession); and furthermore, 7 out of 10 HR professionals say that personal financial challenges have at least some impact on overall employee performance.
We can cite a myriad of these studies that draw the same corollary – 1) employees feel like their personal financial situation is causing stress and lack of productivity, and they want help from their employer; and 2) employers want their employees to be engaged, improve themselves, and consequently, improve their performance and output.
The Return on Investment
You might be wondering: what is the ROI on Financial Wellness? Successful financial wellness programs can improve your employees’ financial picture, your organization’s retirement plan, and the productivity and well-being of your workforce. However, much of this hinges on delivering financial wellness “the right way”. One of the early steps of creating your program is to identify your goal – what are you looking to improve or achieve. With our clients, we have actively engaged employees to get first-hand feedback on the top financial issues and challenges they face and the topics that are most relevant to them.
By targeting these specific and shared financial needs of employees, financial wellness programs can yield impressive results. Here is survey data from Financial Finesse on the different actions and improvements employees have made after one year of a targeted financial wellness program:
Still, the prevailing obstacle for an organization is a lack of quantitative results to the company’s bottom line. We live in a world where data (and big data, in particular) is king. The results listed above generally sound great for any company’s employees; however, the common question is – what’s in it for us (the company)? While there is great anecdotal evidence on how these programs help employees, what we lack, at least to date, is the quantifiable data on how this improves the company.
But it is not far from reality. We are starting to work with several institutions that are helping companies in measuring the financial impact, benefit, and ROI that financial wellness will deliver to the company today, tomorrow, and in 10+ years. As you would expect, the majority of the benefit comes many years in the future – something that might be difficult for the CFO of a publicly traded company to swallow when they are looking at meeting targets for the next quarter.
Nonetheless, we are strong proponents that a true financial wellness program delivers significant positive impacts to your organization, including: improved employee loyalty, productivity, and long-term retention; reduced financial stress and distractions in the workplace, and improved and appropriate usage of employee benefits including retirement, health, and voluntary benefits.
Regardless of your position on consumer driven healthcare, results of health wellness have been pretty astounding, when it is delivered the right way. We think a “consumer driven” approach to the retirement plan will also deliver a much higher rate of success for employees to retire on time and on their terms. However, it starts with helping them gain financial literacy and providing resources to make wise decisions for today. Think about it, someone saving 10% of their pay is fantastic! But if they don’t have an ample emergency savings or are saddled in high interest credit card or student loan debt, the first car accident or home emergency can send their financial picture into a whirlwind – seriously negating the great work you and they were doing for their retirement savings. We need to get financial wellness right for the retirement well-being of all generations, and to create better financial stewards and consumers.
In Part II of our New Frontier of Wellness series, Alex will write about the initial steps company's have to take in order to ensure a future Financial Wellness program is successful.