Financial wellness is a hot topic. It’s discussed, written about and analyzed at conferences. Moving from simply talking about financial wellness to its actual execution, however, is a huge hurdle for many advisors, for a variety of reasons.
One thing is crystal clear—plan participants are in need of more financial literacy, and plan sponsors are trying to find ways to help them. Plan sponsors know they have a responsibility to educate their participants. Advisors see the opportunity to potentially build their practices and strengthen existing relationships.
The results of recent studies show the extent of the issue and its impact:
According to The Pew Charitable Trusts, writing in 2015 on the topic of financial education, “demand from participants is big”; 83 percent reported that they have a lack of savings, 71 percent stated they do not have enough money to cover regular expenses, and 69 percent said they do not have enough money for retirement.
According to the PricewaterhouseCoopers 2016 Employee Financial Wellness Survey, 46 percent of employees spend three hours or more on personal finances at work, creating a distraction in the workplace.
And, according to the 2017 PWC Employee Financial Wellness Survey, employees are nearly twice as likely to miss work due to personal financial issues.
These statistics are not at all shocking when you consider that numerous studies show when advisors are with the plan participant and delivering financial information, we are not “connecting” with them in a meaningful and useful manner.
They are dealing with short-term, day-to-day financial crises, and are not ready to “listen” to us as we discuss the benefits of investing for their retirement.
The traditional “retirement ready” conversation is not an effective means of communication for many employees.
From the employer’s perspective, stressed-out employees lead to lower productivity. Even more compelling for the employer is the impact of an employee deferring retirement because they are not properly prepared.
This was illustrated by Prudential Financial’s Why Employers Should Care About the Cost of Delayed Retirements. The conclusion was that for every employee who could not retire “on time”, the cost to the employer was $50,000 per year.
The real cost, they state, is actually higher “because qualitative costs of delayed retirements, such as the impact on productivity and on promotion and advancement opportunities in the workforce are not considered and measured.”
One of the hurdles, historically, with getting a commitment to deliver financial wellness has been proper benchmarking. Financial wellness may sound like a good “idea”, but how can we “sell” this to the plan sponsor when we can’t show them the impact, and we can’t show them what works.
The Prudential study is just another “number” we can point to that sheds light on the impact of financial literacy to the corporate bottom line. This adds to the work Dr. Thomas Garmin has compiled that suggests an effective financial wellness program can return $2.8 per every $1 invested to the organization.
From an advisor’s perspective, the need for financial literacy represents a tremendous opportunity. According to The Elephant in the Room, authored by Ann Schleck & Co and Hartford Funds in 2016, 51 percent of advisors surveyed said they expect financial wellness will add revenue to their firms. In the same research, advisors expect a tripling of plan sponsor utilization of different financial wellness programs in five years.
Bottom line: the employee is demanding more help, the employer recognizes this and is trying to offer it, and the advisor/plan consultant can offer up a solution that would benefit everyone. What hurdles could possibly be left to solving this problem?
I have spoken with hundreds of plan sponsors and plan consultants, and I hear feedback that the topic of financial wellness is simply too big. There is not enough clarity about what it is, and the playing field of wellness offerings is growing exponentially. This gives way to an enormous amount of confusion and makes it difficult for the advisor to successfully execute on the great “idea” of financial wellness.
In the next of our three-part series, we will explore the common hurdles advisors and plan sponsors face in attempting to address the topic of financial wellness.