Financial wellness programs are becoming a staple in the employee benefit universe.
As a rapidly growing industry, we often lack a consistent definition for financial wellness. This leads to organizations believing they have implemented a financial wellness program when in reality, they are only offering a handful of tools or resources that may present more challenges when offered in a silo.
I define financial wellness as the process by which an individual can efficiently and accurately assess their financial posture, identify personal goals, and be motivated to gain the necessary knowledge and resources to create behavioral change. Behavioral change will result in improved emotional and mental well-being, along with short- and long-term financial stability.
Seventy-eight percent of U.S. workers live paycheck to paycheck to make ends meet. The need for financial wellness is clear, but there are consistent pillars that must be addressed to affect change. This includes: Spending, saving, borrowing and planning. When evaluating employers’ financial wellness plans, the biggest challenge for each organization is defining what a successful program looks like, determining what aspects are currently being offered and identifying gaps in the services they provide.
There are some common financial services that are mistaken for holistic financial wellness programs. First, retirement plans are typically the most valuable tool an employer offers to help their employees establish long-term savings and future financial stability.
However, even when employees are fully aware and engaged, retirement plans do little to improve financial wellness. In fact, nearly 60 percent of investors ages 18 to 34 say they already have taken money from their retirement account. Why? Because they only had the "plan" pillar to fall back on.
Second, many companies have their own credit union that can provide member-based banking services. Some employers have strategic banking relationships established to the benefit of their employees. These two options provide great opportunities to get employees to partake in traditional and alternative banking services.
The value of such to employees can be substantial, partially serving elements of the financial wellness pillars. However, there are reasons why these services need to be included in a larger financial wellness initiative. For instance, 95 percent of Americans already have banking services and prefer to maintain those relationships. The lack of personal assessments based on data and current behaviors does not provide an opportunity for the credit union partner to impact employee development.
Additionally, tools, resources and aggregators of spending habits that create visibility and awareness are not typically found with these relationships. Personalized, motivational roadmaps based on the unique position of each employee are also lacking.
Linking existing credit union or banking relationships with a financial wellness partner can drive membership and provide both the employer and financial institutions with valuable data. They can use the data to offer more relevant services and opportunities to employees.
Employee assistance plans are also commonly considered part of a financial wellness program. The existence of these plans within organizations is always encouraging and emphasizes one thing: Culture. It means the employer cares about their employees and recognizes that life presents unexpected challenges.
Nearly 3 in 4 workers say they are in debt today – more than half think they will always be. Forty percent of Americans can’t pay $400 for an unexpected expense. I applaud these programs, the generosity of the employer and their willingness to help.
However, these resources are made available to a limited and extreme audience of employees. Though helpful in the immediate situation, this solution doesn’t drive financial wellness or behavioral change.
We are seeing more highly interactive educational platforms that involve gamification, video, mobile and virtual environments. Educational technology and financial education are evolving at record speeds. Education is a critical element of financial wellness because often it is the knowledge that encourages and reinforces behavioral change.
The educational content must be meaningful, relevant and timely for the individual consuming it. The answers must be personal, unique and motivate behavioral change surrounding the four aforementioned pillars. However, education without a means to solve financial challenges and plan for tomorrow is only part of the solution.
Finally, financial advisors are typically offered alongside the retirement plan. Although the financial advising services can provide vast value to some individuals, it can be cost-prohibitive and is often not accessible to most of the employee base.
Financial advisement generally focuses on long-term savings and goals, often through traditional investment vehicles. Financial advisors can certainly provide value, but the pillars of "spend" and "borrow" are usually ignored.
I don’t want to take away from the value of these services. In fact, they are excellent tools, resources and services that can provide enhanced value to a comprehensive financial wellness platform. Absent of a holistic financial wellness program to support any of these initiatives, the potential value to the employee and employer won’t be realized.
What’s the most efficient and effective way to assess your current financial wellness services to determine value and return? Ask yourself these questions:
Does the platform offer a personal assessment of each employee’s unique situation? Does the assessment return quantifiable and qualifiable data?
Does the platform address 100 percent of your employee base, including the least sophisticated employees?
Does the platform integrate the various components to provide a tailored path for each employee, including assessment, education, tools, feedback and solutions?
Does your platform offer solutions for short-term financial challenges like cash flow issues, as well as long-term financial challenges associated with savings and development?
Does your platform provide real-time data that quantifies the behavioral change within your employee base, while motivating and recognizing employee accomplishments?
