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Are Financial Wellness Programs Effective?

Consider how workers value the benefits and whether those benefits are helping them. It’s not just the numbers.

Employers’ interest in financial wellness programs continues to grow, but are they worth it?

Alight’s 2020 Hot Topics in Retirement and Financial Wellbeing survey polled over 130 organizations with 5.5 million workers. The responses revealed that:

  • 72% of employers say that they include financial well-being as a pillar of a broader well-being program—an increase of 20% over the last two years.
  • 92% say they are likely to expand their financial well-being programs in ways that extend beyond the retirement plan, with two-thirds indicating they are very likely to act in 2020.
  • The state of employers’ financial well-being strategies has matured since last year. The number of employers who have a concrete strategy stands at nearly a third, and those who have already executed their strategy increased to 13% (up from 8% in 2019).

Sales Pitch or Strategy?

The number of vendors offering some form of financial wellness program is also growing, according to Shane Bartling, Senior Director Retirement with Willis Towers Watson. “We do see a large number of new vendors that have entered the space, niche vendors that are approaching employers with their value proposition,” he explains. “So, the employers are coming to us with questions, looking for input on which of the vendors should be considered and which could actually add quite a bit of value for the workforce. There’s a lot of tire-kicking happening around the vendors and a lot of confusion trying to understand the differentiation between the vendors.”

At the same time, Bartling sees a trend emerging to actively evaluate programs from data-driven and strategic perspectives versus simply responding to sales pitches. The Willis Towers Watson 2019 Best Practices in Health Care Survey asked larger employers if they set and tracked specific metrics and objectives with financial well-being programs. “The response that we got back was 13% did that today and another 33% are either planning or considering adding for 2020 or 2021,” he notes. The Alight survey found similar interest in developing a strategy: 45% of respondents were in the process of creating a broad financial well-being strategy; 31% had created one and were executing on it.

What to Measure

Assuming your clients want to measure their wellness programs’ value, it’s not immediately apparent what metrics they should use. While wealth managers routinely evaluate their clients’ financial status from multiple perspectives, human resource departments are dealing with population-level statistics. One approach is to examine what Bartling calls indicators of financial stress in the workforce, citing the use of 401(k) plan hardships loans as an example of an available data point that provides a stress indication. This approach to using available metrics has been around for about four or five years, he explains, and adopters are beginning to see patterns in the data and correlations with wellness measures. “The way that employees use benefits and use payroll can send powerful messages around the degree of financial stress in the workforce and further, you can actually connect that to incidences of job performance and safety even,” says Bartling.

Is ROI Too Elusive?

Ideally, your clients could accurately measure the returns from their financial wellness programs as they do with other expenditures, but some observers express skepticism about that approach. Rob Austin, Head of Research with Alight, says that the attempt to measure the programs’ return on investment has been around for a while but it’s losing traction as companies embed financial wellness into their overall benefits programs. “You never hear somebody say, well, what’s the return on investment for my paid time-off program? Or what’s my return on investment for my 401(k)? Or, what’s my return on investment for my health benefits?” he notes.

No one calculates those measures because it’s very difficult to track cause and effect, he explains. For instance, an employee’s car breaks down. Previously that employee would have missed work but because he followed the financial wellness program’s advice about the need for emergency savings he was able to get the car repaired quickly. Human resources departments  aren’t in the business of tracking these chains of events and hence, “There’s a lot of kind of tenuous relationships there as you peel back that layer,” says Austin.

Instead of ROI stats, when the Alight survey asked participants how they intended to measure the results of their financial well-being programs, the responses focused on readily available gauges of effectiveness. Eighty-two percent said they are relying primarily on employee usage of benefits. Employee engagement (60%) and retirement statistics such as decreased plan leakage and higher participation rates (60%) were the second and third most-cited approaches.

From Austin’s perspective, while it’s good to have some quantitative data behind well-being offerings, employers should also consider how workers value the benefits and whether those benefits are helping them. It’s not just the numbers, he says: “Think qualitatively in addition to quantitatively.”

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