The heavens parted, the angels sang and something big happened at GRP Advisor Alliance’s annual summit Friday morning— Liz Davidson provided a succinct definition of financial wellness, at least when compared with financial education.
“Financial education is information, and is treated as an event. Financial wellness is a lifestyle and a culture,” Davidson, CEO of financial wellness provider Financial Finesse, said in a session dedicated to the topic.
Are 401k plan sponsors and participants finally understanding the difference, and more importantly, the need for the latter?
“No,” Davidson bluntly stated in an interview following her panel discussion. “The vast majority of small to medium-size plan sponsors do not know the difference. Financial education is painful and it’s process-focused. But so much is changing and they’re so much more at ease by just changing the word.”
Part of the confusion stems from the aforementioned lack of a standard industry definition, with Davidson noting that discount purchasing programs and even high-interest loans through an employer are billed a “financial wellness.”
“This is why we need a definition of what it is and why employees need it,” she lamented. “But it must be unbiased and can’t be all sales. It’s also why we must have a fiduciary standard coupled with financial wellness.”
Her last remark provided a natural opening to contrast her statements with fiduciary critic Don Trone, of which she was hesitant because of her respect for Trone’s work in other areas.
“I think he is spot on with the research,” she diplomatically began, before conceding, “I don’t agree with his interpretation of the DOL’s fiduciary rule. The fact that theoretically anyone can call themselves a financial advisor, even if they are a hairdresser, is a problem.”
Did she believe she was ahead of the curve in founding a financial wellness firm “in the last century,” or 1999?
“Absolutely,” she answered. “Especially in San Francisco, where we are located. Employees would have no problem spending money on concert tickets and masseuses. We would go to the employers and say this is a problem, and they would say, ‘Why? Our employees are doing really well.’ Which they were.”
She referenced an earlier session in which a speaker flashed hundreds of mutual fund companies on the screen, noting that it was once a sign of a good sales presentation.
“The fact that that is now seen as a joke is a sign of progress,” Davidson said. “This is a great time for financial wellness and 2017 has been called the year of financial wellness. It is incumbent upon us to make sure it is not a fad, and that involves putting resources together in the right way.”
Planning for and ensuring a successful retirement is part of a larger ecosystem, she concluded.
“You don’t run a marathon the first day you begin training; it’s a process. It’s certainly not easy, but nothing worthwhile ever is.”
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.
