Education is good, behavior better. 401k plan participants can have all the information they want, but if they fail to act, what good is it?
“Educational content has value and serves as a building block to basic financial literacy, but plan sponsors and providers consistently describe education on its own as ‘not enough’ to deliver an effective financial wellness program,” Cerulli Associates writes.
The global research and consulting firm notes that recordkeepers and retirement plan advisors observe that a driving force behind their decision to create a financial wellness program or enhance their current offering is client demand.
“Many employees in today’s workforce are struggling with competing financial priorities and they will often express these concerns to their employer,” Dan Cook, a research analyst at Cerulli, said in a statement. “Plan sponsors have taken note—nearly one-third identify improving the financial wellness of employees as a top priority for their 401k plan.”
This sentiment highlights the need for solutions that help address participants’ holistic financial needs, beyond just retirement savings, Cook added.
However, measurement of success and return on investment for plan sponsors is often discussed as an impediment to the adoption and effective implementation of financial wellness programs.
Goals and objectives
“Plan sponsors have a broad range of goals for financial wellness programs,” Cook said. “Some goals, such as increasing 401k plan contribution rates, are straightforward to measure. Other goals, such as improving financial literacy, increasing workplace productivity, and decreasing employee stress, are more nebulous and/or difficult to directly attribute to a financial wellness initiative.”
By structuring participant engagements as action-oriented rather than education-oriented, providers can overcome the ROI hurdle and connect financial wellness components to workplace outcomes.
“Individuals must be triggered to enact changes that impact their financial lives in a positive way,” Cook concluded. “As such, providers must consistently collect data to identify engagement strategies that resonate most with specific groups and craft digital experiences through which a participant’s ‘next-best action’ is only one or two clicks away.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
