As a 401k advisor, you already know: Financial wellness is a big deal.
According to a study in the Wall Street Journal, 59% of employers say they are very likely to focus on the financial wellbeing of their workers this year—up from just 30% in 2014.
With this huge increase in demand, financial wellness represents a major opportunity for 401k advisors to differentiate their services, bolster their value propositions, and secure additional client relations which will last for many years. Of course, failing to take advantage of this opportunity could be dangerous as well.
In this short post, we’ll break down the five major reasons why offering financial wellness services, in addition to your 401k advisory services, could be a crucial move to make in 2019.
No. 1: Financial Wellness Could Boost Client Retention
Financial wellness services make you an indispensable resource to your clients, which, in turn, helps you forge long-term business and personal relationships.
Saving for retirement is the No. 1 financial stress for Americans, but oh dear, there are so many others…
[From 2018 Charles Schwab Study]
As you guide participants through this maze of financial pitfalls, you gradually (or swiftly, depending on how badly someone needs help) become the deeply appreciated, go-to resource for financial information.
That’s lovely in and of itself, but it also means the client will have a hard time even considering a move when other advisors inevitably come after the business. Food for thought.
No. 2: Financial Wellness Lets You Justify Higher Fees
Few 401k advisors have gone about business over the last 10 years un-phased by the growing commoditization of their services. With many 401k advisors offering identical services, the only point left to compete on is… you guessed it… price.
Between 2014 and 2016, advisor’s revenue from plans with $50 million in assets and up plummeted by a dramatic 12.5%. Only smaller plans, under $25 million, saw increases, though only in the single digits, and even then, they felt pressure to provide more services to clients.
Fees may be dwindling in a congested market, but financial wellness for participants is a seriously valuable (and still relatively uncommon) service, and instantly justifies a bit of a premium. There’s no need to bring down your fees to compete when you offer above and beyond.
No. 3: Financial Wellness Can Increase 401k Participation
Lagging 401k participation is a common source of anxiety for plan sponsors, but financial wellness initiatives can be uniquely effective for increasing participation.
In one study, employees who received financial guidance reported feeling that their financial situations were better overall. They also “felt more in control of their finances, had lower levels of stress, were more prepared for contingencies, were more comfortable with their financial situations, put more effort into their finances, and were more satisfied with their financial situations.”
When employees feel financially confident and not stressed out, they’re much more likely to participate in the 401k – which means happier clients and more assets. The end result of financial wellness doesn’t have to be veiled in euphemisms. When advisors offer financial wellness services, everyone can make (and save) more money.
No. 4: Financial Wellness Can Lead to More Referrals from Participants
Word of mouth is incredibly powerful – particularly when it comes to recommendations about money management. So, we can’t ignore that one of the major advantages of offering financial wellness to clients is the personal relationship that develops between advisors and participants.
Over time, the advisor becomes a deeply trusted and indispensable resource to pretty much the whole company – each newly financially-confident employee can become an evangelist for your services. That means when they move companies, they may want to bring you with them, and internally refer your services to their new employer.
In essence, providing financial wellness services helps you develop the type of business and personal relationships that lead to more positive word-of-mouth. So not only do protect yourself against deepening commoditization, you grow your business as well.
No. 5: If You Wait, It’ll Be Too Late
We’ve learned it time and time again—early adopters win big.
Get in before this trend explodes and you’ll give yourself a nice, long lead over the competition. By the time this is market-standard, you’ll be all set, and can focus on adapting for the next change approaching (or on enjoying retirement yourself!).
Big-name advisory firms and small business 401k providers are already making moves. Centurion Group, Resources Investment Advisors Inc. and AFS 401k Retirement Services have already launched financial advising services. You can bet that list will only get longer.
If all these reasons are sounding pretty good, you’re not alone in your thinking – one more reason to adopt this additional service sooner rather than later.
As more 401k advisors begin to offer financial wellness services, it’ll become increasingly difficult to stand out with it, so strike while the iron’s hot. It’s time to forge a future client base you can rely on – and who rely on you.
Evan Ross, content guru with San Francisco-based 401k tech company ForUsAll, is on a mission to use the power of storytelling to change the world for the better.
