Plan sponsors are slated to increase “financial wellness” programs beyond retirement decisions in 2017, to include such things as financial literacy, budgeting, debt management and financial planning. Here are the key points retirement plan advisors should follow.
Employer Interest Is Growing
Aon Hewitt’s 2016 Hot Topics in Retirement and Financial Well-Being report found that 58 percent of employers already offer help in at least one category that falls under the umbrella of financial well-being. By the end of 2017, that percentage is expected to grow to 84 percent.
Over half of employers indicate they are very likely to focus on the financial well-being of employees beyond only retirement decisions, a 10 percentage point increase from 2015 and topping employer initiatives in 2016.
The rise is partly explained by employers’ bringing physical wellness initiatives into their programs, says Greg Ward, a director with program provider Financial Finesse in El Segundo, California. In fact, developing a wellness culture has become a “best practice,” he says.
Advisor Interest Is Growing
For some advisors, providing companies with financial wellness programs has moved from an afterthought to a business differentiator. A recent survey from ADP, Grow Your Practice with Financial Wellness, found that while only 22 percent of advisors work with employers on financial wellness programs, another 46 percent are considering it.
Patrick Delaney, vice president of retirement insights with T. Rowe Price in Baltimore, warns advisors need to stay in tune with their clients’ focus. If an advisor is measuring success on the participants’ replacement income ratios, a failure to adopt some financial wellness initiatives can hurt their performance rating.
But, he says Delaney, some advisors find a focus on financial wellness “esoteric.” That’s a missed opportunity. “We’ve heard that advisors are seeing new business show up on their doorstep simply because they can lend credible insights in the area.”
T. Rowe Price’s record keeping business works with financial wellness vendor SmartDollar to offer the service to clients. The firm has also developed educational materials for advisors such as its Financial Wellness Program Evaluator to help advisors and consultants guide their clients through the options from various vendors.
The Search for ROI Continues
But can an advisor show that the initiatives are worth the effort? Assuming a company’s benefits coordinator can persuade the company’s CFO to adopt a program, in six or 12 months the CFO likely will be seeking evidence of the payoff. “How well is it working, are participants adopting it?” says Delaney. “If so, are their (employee) behaviors … changing for the better?”
Franklin, Tennessee–based Personal Finance Employee Education Fund has developed an eight-question, self-reported measure of perceived financial distress and well-being. Financial Finesse uses the assessment to aggregate and analyze data at the company level.
They looked at one Fortune 100 company that grouped employees by wellness score into five categories, from Suffering (in crisis) to Secure (taken steps to build and preserve wealth), and found that those who used the financial wellness program cost the company less for health care, were absent less with fewer wage garnishments and contributed more to flexible spending and health savings accounts, any or all of which would seem to meet the criteria of a beneficial outcome.