4 Critical Financial Wellness Questions (and Answers)

Two-thirds of Americans can’t pass basic financial literacy test

What will it take to increase adoption?What will it take to increase adoption?

Financial wellness is—thankfully—all the rage, at least in an industry “inside baseball” sort of way. Yet when will it break through to the general public, if at all?

If the success of health and wellness programs over the past two decades are any guide, it shouldn’t be long. However, questions over what it is and how it’s best implemented linger, part of the reason for slow adoption (the other being cost, and convincing CEOs and CFOs of its impact on the bottom line).

Joe DeSilva, ADP Retirement Services’ senior vice president and general manager, is leading the company’s headlong dive into financial wellness, and finding quite a bit of success in doing so. He describes what ADP is doing right, and what needs to happens to get participants on track.

401(k) Specialist: How do you define the term financial wellness?

Joe DeSilva: Financial wellness can mean different things to different people. At ADP, we define financial wellness as a program designed to address and support an employee’s complete financial picture and improve their overall financial health.

For our program, we encompass multiple topics, including, but not limited to, budgeting, debt management, financial literacy, insurance, college saving, managing health care costs, retirement planning, and estate planning.

401(k) Specialist: Where is the general public and 401k participant’s knowledge and acceptance of financial wellness?

DeSilva: According to a study by the FINRA Foundation, which surveyed 27,564 Americans last year, nearly two-thirds can’t pass a basic test of financial literacy. Other research indicates that workers are struggling to manage their financial lives. Forty percent live paycheck-to-paycheck and identify money as a top source of significant stress.

A survey conducted by Harris Poll reported that 86 percent of respondents feel it’s important for employers to offer financial wellness programs. And 70 percent of survey respondents whose employers don’t provide a financial wellness program say they would be very or somewhat likely to take advantage of resources that would help them plan for their financial futures.

The difficulty is that most employees don’t want anyone to know they are participating in a financial wellness program. The same survey found 60 percent of respondents feel this way.

And according to a survey we commissioned, advisors involved in supporting employers with financial wellness programs find employees don’t participant—even among employees with financial problems, advisors in the survey indicate they’ve seen a lack of interest in learning about money management.

401k(k) Specialist: What are the ‘must haves’ to make financial wellness successful?

DeSilva: Based on research we commissioned must-haves for employers include:

  • Personal finance such as debt management and budgeting (86 percent)
  • Retirement planning fundamentals (84 percent)
  • Basic financial literacy (50 percent)
  • Post-retirement planning (36 percent)
  • Health care cost (35 percent)
  • Insurance needs (19 percent)
  • Estate planning (12 percent)
  • College savings (12 percent)

This is where an advisor can play a critical role in the success of a company’s financial wellness program. Many employers aren’t sure where to start or how to make their plan effective. A financial advisor can provide valuable guidance and one-on-one support to their employees.

401(k) Specialist: What statistics can you relate on the cost of stressed-out, ‘financially unfit’ employees?

DeSilva: PWC’s 2016 Employee Wellness Survey indicates that 28 percent of respondents have experienced health issues related to financial worries, 17 percent indicated their productivity at work was impacted, and 8 percent admitted to missing work occasionally because of financial worries.

According to BrightScope, it’s estimated that employee stress costs American businesses upwards of $300 million each year.  And a report from AON Hewitt indicates many Americans delay retirement due to lack of savings and this delay could cost employers over $5,000 annually per employee in health insurance premiums.

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