Too Many Products, Not Enough Education Hampers Financial Wellness Plans
Experts agree financial wellness is beneficial, though some employers can’t define it.
Defined contribution plan sponsors are not waiting for politics or the market to dictate financial wellness strategies, a recent retirement consulting firm survey showed, but experts still warn that there are danger areas when starting or expanding these benefits.
Today, 92 percent of plan sponsors say they will focus on workers’ financial health beyond their progress with their 401(k) plans, data from Aon Hewitt’s 2017 Hot Topics in Retirement show. Right now, 58 percent of employers offer tools aimed at improving financial wellness; by the end of this year, Aon Hewitt expects that number to jump to 84 percent.
“In the past, it had always been a few intrepid souls trying these new things,” said Rob Austin, director of retirement research at Aon Hewitt. “Now it’s really catching on and becoming a bigger trend in the industry.”
Austin said financial wellness is a person’s ability to financially take care of things today, to be ready for tomorrow and for any surprises along the way. It’s not just saving for retirement or paying off debt. It’s a holistic strategy aimed at helping manage issues like purchasing a home, evaluating various insurance options and paying off student loans. Aon Hewitt found 57 percent of employers hope that by offering these programs, workers will be more productive and spend less time with their personal money issues.
“It’s one way to help improve other investments that companies are making with their employees,” Austin said.
The number of products coming out combined with plan sponsors’ desire to get a program in place or expanded may be going too fast, experts agreed. Even though it seems like every plan sponsor has or is working on some kind of financial wellness strategy, Aon Hewitt’s survey showed that only 16 percent of employers have a policy outlining a financial wellness objective and nearly half of employers are just in the development phase.
“It seems a little backwards,” Austin said.
Financial Finesse, a company that has been offering financial wellness programs for nearly two decades, is seeing the rush to market — on the provider and user sides — as well as a lot of confusion.
“There are a lot of employers who want to offer something, but they don’t even know what financial wellness means,” said Liz Davidson, CEO and founder of Financial Finesse. “There are firms advertising financial wellness, but what they are really doing is financial sales or financial advising. It is a term that is being used and misused.”
To clarify definitions and to help everyone get on the same level of understanding, Financial Finesse created an FAQ white paper and best practices guide.
Financial Finesse focuses its services on larger companies, but Davidson said the area for misuse of the term may be more abundant in smaller markets. The FAQ’s main purpose is to provide information to those companies that may not have the resources found in larger companies, she said.
It lays the groundwork for understanding financial wellness and gives employers a list of areas to examine to see whether the company even needs this kind of program. One area Financial Finesse suggests evaluating is employees’ level of financial stress. The paper also provides links to other reports that dive deeper into the subject.
Davidson stressed the importance of knowing the program that is being offered to employees. Sometimes financial wellness initiatives are simply modules or videos that employees review on their own. Other programs are simply tools to sell other products the provider offers. For Davidson, financial wellness is an interactive program where there are incentives to learning and follow up that can be used to measure success or failure of a program.
Without these minimum steps, the term financial wellness gets polluted and loses its value, which is dangerous for the entire segment of the retirement industry, she said.
“There is a huge missed opportunity to help people if the term gets hijacked,” she said.