Who knew? Cut out the cigarettes, cheeseburgers and late-night liquor and have happier, healthier and more productive employees.
Trading in the cookies for gym memberships did wonders for physical health, and there’s a growing realization the same can be done for the employee’s financial health.
But how, exactly, is it done, and how can the implementation of financial wellness programs translate to a win-win (win) for advisors, employers and—most importantly—401(k) plan participants? How can advisors diversify their revenue stream, grow their business and fulfill a critical need all by offering financial wellness programs?
New research from benefits powerhouse ADP sheds light on what it will take to move discussions of financial wellness from knowing nods of its importance to actionable next steps. It also highlights the incredible opportunity for smart advisors to use financial wellness as a major business-building tool (Hint: There aren’t a lot of advisors currently offering it).
401(k) Specialist magazine sat with Joe DeSilva, ADP Retirement Services’ senior vice president and general manager for a frank discussion about what it will take to boost financial wellness adoption rates, how advisors can specifically benefit and a new whitepaper the company released on the subject.
401(k) Specialist: Part of the problem seems to be that there is no singular definition or standards of success surrounding financial wellness, so how does ADP define financial wellness?
Joe DeSilva: In the research study we commissioned, employers and advisors were asked how they define financial wellness, because it can mean different things to different people. Employers had multiple definitions from “the ability to provide financial benefits or products to employees to improve their financial well-being” to “having your bills paid and adequate retirement savings.” [1]
I think these answers illustrate the challenges faced by providers and advisors. Financial wellness is a broad term. At ADP, we feel financial wellness starts with employees who are prepared for life’s financial challenges and having a firm grasp of financial literacy, which also ultimately helps employers by getting their workforce retirement ready.
401(k) Specialist: Why are financial wellness adoption rates so low among employers, and why aren’t more advisors offering financial wellness programs?
DeSilva: According to the study, while many employers acknowledge that a financial wellness program can have a positive impact on their workforce, only one in five currently offers it. However, more than a third (36 percent) have a strategy or are considering one. The low adoption rate is largely due to a lack of awareness about what financial wellness is and how it can benefit employees.
Regarding advisors, few have ventured into the area of financial wellness even though they’ve supported 401(k) plans for some time. Just 22 percent of advisors are working with employers on financial wellness programs, according to the study, although another 46 percent are considering it.
401(k) Specialist: Why have financial education efforts failed in the past and what needs to happen now?
DeSilva: There are many reasons—low engagement of employees, low perceived value and benefit by employers—I think the list is probably long.
With awareness growing among employers about just how financially stressed their workers are and that employees carry these financial worries to work (which impacts job performance), the time is now for advisors to support their business clients’ and accompanying workforces with financial wellness programs. With almost half of workers reporting that they spend three or more hours per week distracted by personal finance, it means employee engagement is at risk.
Advisors are uniquely positioned to provide this much-needed and valuable service. In our study, advisors who embraced financial wellness believe it’s a unique opportunity to expand their offerings and grow their businesses. One advisor said, “It will be a win-win for employers and employees and will present opportunities for RIAs who can facilitate it.”
401(k) Specialist: What benefits do both advisors and employees realize by offering financial wellness programs? How do they effectively work together to implement a program?
DeSilva: Employers acknowledge that when employees have less financial stress, it’s better for their business. Financial wellness programs have shown to improve productivity, reduce absenteeism, and lower health care costs. Employers also cite improving employee satisfaction and reducing employee stress as key goals, along with employee retention and improved company culture.
For advisors who work on 401(k) plans, or who have employers as business clients, financial wellness is a natural next step. Based on the research, financial wellness can generate referrals and lead to other types of advising engagements, such as comprehensive financial planning or estate planning. One advisor said, “I see financial wellness as an area with unlimited growth potential.”
401(k) Specialist: You mentioned financial stress. What kind of toll does it take on both the employee and employer?
DeSilva: Financial difficulties aren’t good for business. Employees that bring their financial stress to work can rob a company of productivity, be distracted on the job, and increase healthcare costs for a business. In addition, when workers can’t make ends meet, saving for retirement can seem impossible. And, if they’re not saving enough, they will retire later than planned to make up the difference–which impacts both the employee and the employer.
401(k) Specialist: Are financial wellness programs quantifiable to both the employer’s and advisor’s bottom lines? In other words, how does one convince a cost-conscious CFO of their effectiveness?
DeSilva: I think the value of financial wellness programs are quantifiable to CFOs through lowered healthcare costs, reduce absenteeism, improved productivity and job performance, as well as higher employee engagement. In addition, employees who are not prepared for retirement and therefore postpone because they can’t afford to retire can impact a business through increased costs.
401(k) Specialist: Financial wellness might be important in-and-of itself, but how do we get people to take action—that next step—to improve financial and retirement outcomes (technology, ease-of-use)?
DeSilva: It has to be easy for employees to access, and should include engaging, interactive content and tools that help employees meet life’s financial challenges, all the while planning for a secure retirement. One tool identified by the study as most likely to make employees eager to participate was one-on-one coaching. Among employers with financial wellness programs, 69 percent provide personal financial coaching, as do 82 percent of advisors, suggesting they’re one of the best ways to address employees’ specific financial planning challenges.
The views expressed herein are those of the author, are intended for general information only and are not intended to provide investment, financial, tax or legal advice or a recommendation for any particular situation or plan. ADP, LLC and its affiliates (ADP) do not endorse or recommend specific investment companies or products, financial advisors or service providers; engage or compensate any financial advisors to provide advice to plans or participants; offer financial, investment, tax or legal advice or management services; or serve in a fiduciary capacity with respect to retirement plans. Nothing herein is intended to be, nor should be construed as, advice or a recommendation for a particular situation or plan. Please consult with your own advisors for such advice.
[1] Financial Wellness Study – conducted by SourceMedia for ADP Retirement Services; July 2016
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.
