How do you specifically measure the success (or lack thereof) of 401k financial wellness programs in the workplace?
“Measurement of success and ROI for plan sponsors are the most consistently discussed impediments to the adoption and effective implementation of financial wellness programs,” according to new research from Cerulli Associates, which finds that providers continue to question how to clearly quantify the impact of financial wellness programs.
Financial wellness programs emphasize “holistic advice” beyond an individual’s workplace retirement savings account and address topics such as budgeting, debt management, and healthcare expenses.
“While improved education on these topics offers employees a better understanding of how to budget and plan for life expenses, plan sponsors are challenged by the costs associated with the programs and proving the benefits,” Boston and London-based Cerulli notes. “Some plan sponsors are flexible and want to feel comfortable that the financial wellness program is helping employees at a reasonable price.”
Others, it adds, maintain strict budget policies that require achieving a specific return on investment to secure program funding.
Recommendations
Cerulli recommends that providers operate under the assumption that plan sponsors want hard facts rather than “a feeling of comfort.”
“To effectively measure the success of a financial wellness program, providers must collaborate with plan sponsors (and their advisors/consultants) to determine specific goals for the program and a reasonable timeframe in which to achieve them.”
Cerulli’s research finds that financial wellness programs should be grounded in metrics that impact a company’s bottom line, but acknowledges that many employers have goals such as “improve workplace morale” and “retain top employees” that are functions of employee attitudes and behaviors.
Some goals, such as improving employees’ retirement readiness (27%), are straightforward to measure.
Others, such as improving financial literacy (30%), increasing workplace productivity (20%), and decreasing employee stress (14%), are more nebulous and/or difficult to directly attribute to a financial wellness initiative.
To benchmark success, providers should consider leveraging recordkeepers’ digital platforms to track participant behavior (e.g., click rates, interactions per website visit) and engage with advisors to consolidate data from each of a plan sponsor’s vendors.
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.