While most companies have jumped on the financial wellness program bandwagon over the past couple of years, 401(k)-focused advisors are not necessarily being taken along for the ride.
According to a new report released this week from Boston-based Aite Group, employers turn to 401(k) vendors, health plan vendors and even health savings account providers more frequently than 401(k) advisors when it comes to the delivery of financial education for employees.
The finding that there is a financial wellness competitive disadvantage for advisors was called out by the report’s author, Inci Kaya, analyst at Aite Group.
“It is surprising that investment managers, financial advisors, and banks rank further down on that list and are not considered ‘best equipped’ for education very often,” Kaya says. “For financial institutions that live and breathe finance, financial tools, and saving and investment products, this is a highly disappointing revelation.”
The Aite report, “Financial Wellness Roars Into the Spotlight,” addresses the issue of long-stagnant incomes vs. soaring costs of retirement, health care and college, which has created a widening financial gap that is a major source of stress for many employees.
Employers have been increasingly leaning on an assortment of benefits that lend themselves to improving employees’ financial well-being to bridge that gap.
“Stagnant incomes are the root of the underlying problem that employers must properly address, but in the meantime, employers are willing to make some form of financial amends through financial wellness-related employer benefits,” Kaya says.
The research captures views from a cross-section of employee benefit decision-makers across employer sizes, and identifies the trusted sources they turn to for obtaining advice, support, administration, and training for financial wellness services.
As previously mentioned, the findings are not good news for 401(k) advisors being overlooked by companies of all sizes for services in their wheelhouse.
The report specifically asked respondents, “Which partner or organization is best equipped to deliver training for financial wellness?”
The top response by far was “401(k) vendor” with 37%, followed by “our health plan” (19%), “HSA provider” (13%), and “Investment manager/financial advisor” (12%).
“Independent financial advisors, banks, and investment managers are preferred less frequently across all employer segments. This exposes the large gap between the financial advisory world—with advisors who think they should play a major role in education—and the buyers’ perceptions,” Kaya says.
She adds that financial advisors and investment managers are at a competitive disadvantage when it comes to having the ear of employee benefit decision-makers regarding financial wellness. “Their relationships are often formed at a chief financial officer (CFO) or plan administration level—not the most prominent address when it comes to employer benefits,” Kaya adds.
While 401(k) plan providers are in good position as the go-to-sources for financial wellness education and guidance, financial advisors, Kaya says, are not. “They would benefit from additional efforts around building trust and relationships and communicating in a personalized manner with content that is relevant to each customer based on their phase in life.”
The research finds there is a strong alignment between employers’ perceptions about which organization is best equipped to provide financial education and which organization they partner with to deliver that education. “401(k) plan partners are consistently the go-to address,” Kaya says. “This puts retirement planners and 401(k) plan providers in a desirable position to leverage their existing investment expertise into health benefit accounts, particularly HSAs.”
HSAs may be bundled with 401(k) plans to stimulate interest from those that may wish to invest their HSA funds instead of using them as a medical spending account, Kaya notes. “At the end of the day, there is room for employers to expand their benefit offerings from an a-la-carte selection style to a holistic financial wellness approach that properly and fully supports their employees’ financial health.”