Employee Financial Wellness Programs the New Normal

More companies are adding or considering financial wellness programs for their participants, according to Bank of America Merrill Lynch's Workplace Benefits Report.

“Today’s plan sponsor must look beyond 401(k) enrollment and participation,” says David Tyrie, head of retirement and personal wealth solutions for Bank of America Merrill Lynch. “As the survey underscores, there is a growing need for companies to consider their benefits offering more holistically and provide more comprehensive financial education and solutions that can address today’s challenges, such as managing rising health care costs.”

Most companies (83%) report feeling responsible for their employees’ financial wellness, and an equal number of plan sponsors believe access to one-on-one guidance from a financial professional can have a positive impact on the amount of money employees save for retirement.

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This may affect the benefits, education and other resources employers provide. Survey respondents predict large companies, with $100 million or more in 401(k) plan assets, will lead the charge in adopting financial wellness programs. In the past year, the survey found, the number of large companies providing information on budgeting, planning for health care costs and managing debt, among other topics, has significantly increased. Roughly half (48%) of large firms have a financial wellness program in place, up from 35% in 2013.

Overall, 70% of plan sponsors offer resources and educational tools about saving for retirement to their employees. Among large companies, nearly two-thirds (64%) support planning for health care expenses. The number providing information on managing debt and budgeting have roughly doubled since 2013—from 22% and 21%, respectively, to 43% and 40% this year.

While fewer than one in four plan sponsors currently have a strategy in place to improve employees’ financial wellness, more intend to add one in the next two years. Nearly three-quarters of respondents expect that, within 10 years, financial wellness programs will be standard in benefits packages. Doing so makes sense for an employer to remain competitive, the survey found, as employees who use the programs become more satisfied (78%), loyal (70%), engaged (68%) and productive (57%).

“More personalized guidance and education about an individual’s entire financial picture, including savings and health care costs, can have a meaningful impact on a person’s long-term financial health,” said Kim Kasin, managing director, financial guidance executive at Bank of America Merrill Lynch. “Helping employees with their financial life management can be positive for both employees and employers. For employees, it helps to reduce financial stress; and for companies, it makes good business sense because it helps employees be more focused and productive at work.”

Use of incentives to get participants in these programs is less common, however. Just one out of seven employers indicated they have or are considering adding incentives to employees to enroll in these offerings.

Eighty-three percent of employers have experienced a rise in health care costs over the past two years, on average by 11%. Rather than pass the expense on to employees, eight in 10 employers chose to absorb half, if not all, of those cost increases. Unfortunately, to accommodate this, 55% reduced benefits spending—often in the retirement plan. The most common areas to cut spending were: 401(k) plans and pension plans, 56%; employee education, 40%; equity compensation, 36%; and non-qualified deferred compensation (NQDC), 34%.

Still, other employers are adding health spending accounts (HSAs), a tax-advantaged medical savings account that can be paired with a high-deductible health plan (HDHP). However, HSAs are not being leveraged to their fullest potential. Eight in 10 report that they believe their employees view the accounts mainly as near-term spending accounts rather than long-term retirement savings vehicles. 

Roughly half of employees (49%) utilize online tools to see their full financial picture, while 46% favor to work individually with a financial adviser, and 45% reported using relevant research or literature to inform their investment decisions.

Total rewards, or an integrated benefits management portal for employees, are offered by nearly 40% of plan sponsors. However, roughly three quarters are uncertain whether employees’ overall engagement with their benefits has increased since implementation, and nearly three in 10 of those do not believe employees understand how that information works to maximize the value of their integrated benefits.

While half (52%) of plan sponsors with younger employees believe Millennials view benefits differently than other generations, just one in 10 plan sponsors (12%) with Millennial workers have made an effort to use different technologies to motivate these individuals to become more engaged with their benefits. Among those trying out different technologies, texting (49%), LinkedIn (41%) and Facebook (38%) are the most popular channels to communicate with younger workers. Among all employers, smartphones are the preferred technology. Fifty-four percent of employers with Millennial employees report that their human resources (HR) or benefits website is accessible via smartphone.

Unsurprisingly, three quarters (74%) of plan sponsors report feeling that, to do their job effectively, they must cultivate expertise in health care and retirement issues. Six in 10 sponsors will spend more time on health care, while approximately one-third will focus more on the 401(k) plan, hiring and firing, and employee education.

Boston Research Technologies completed the nationwide survey of 1,020 sponsors from companies of all sizes between October 14 and December 4, 2014, on behalf of Bank of America Merrill Lynch. Further information about the Bank of America Merrill Lynch Workplace Benefits Report is available here

RIA Leaders Prioritize Marketing and Business Development

Marketing leaders are excelling in their ability to plan effectively, instill their firm story and apply a disciplined referral process.

The “2014 Fidelity RIA Benchmarking” study found marketing leaders spend 33% more of their revenue on business development and marketing, compared with other registered investment advisers (RIAs), and are seeing 40% more client growth, 23% more asset growth and 20% more revenue growth.

Conversely, when it comes to marketing and business development, only 5% of other RIA firms felt their capabilities were advanced, and only 30% felt they were fairly strong.

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“This is good news for the 65% of RIA firms that do not feel as strong at marketing: Investing in marketing can pay off, but it’s not just about what you spend,” explains Mathias Hitchcock, vice president, practice management and consulting, Fidelity Clearing and Custody. “An investment in time can be just as important. Committing time to even the most fundamental areas of marketing, such as developing a plan or creating a referral process, can yield big gains when it comes to overall growth.”

The study identified five distinct behavioral characteristics of marketing leaders that could benefit other RIA firms.

First, marketing leaders prioritize growth, spending about 2.4% of their revenue on marketing and business development. Compared with other RIA firms, they devote more resources to initiatives that can help positively impact their firm’s growth, including working on a marketing plan and a strategy for centers of influence (COIs), and taking time to improve the sales process.

Of firms with a marketing plan, 45% of leaders are very satisfied with the effectiveness of their plan, versus 7% of other RIAs. Marketing leaders plan effectively, as a large majority (88%) have a written marketing strategy that they update semiannually or annually. They recognize the importance of outling clear goals and assigning responsibility for different tasks, as well as the need to monitor progress.

 

With increased competition, the need for all RIAs to have a story that describes their business model while setting them apart from others is essential. The third key quality of marketing leaders is their ability to ingrain their firm story. The survey shows 73% of leaders have created a clearly defined firm story, versus 47% of other RIAs. They believe the firm’s story is consistently reflected in all their marketing materials, which helps reinforce their message and create a strong image.

Fourth, marketing leaders generate new business opportunities through operational discipline. Having strong relationships is vital, and the study reveals three-quarters of an adviser’s new clients come from referrals made by current clients or COIs. Marketing leaders are more than twice as likely as other RIAs to have an advanced or fairly strong client referral process, at 46% versus 22%. Authors of the study note best practices in this area include having a clear plan, telling a compelling firm story tailored to target client needs, and communicating target client profiles to referral sources.

The final characteristic leaders exhibit is the ability to maximize their marketing mix. Results show the top three activities used by all RIA firms to reach out to clients, prospects and COIs are communications, collateral and events. However, marketing leaders exhibit more depth in usage, with 58% using all three, compared with 40% of other RIAs. They also pursue social media, traditional advertising and public relations more than other RIAs.

The practices observed by marketing leaders can help other RIAs enhance their own business-building capabilities to improve their growth trajectory. According to the study, prioritizing and investing in marketing can result in greater client, asset and revenue growth for these firms.

The online study was conducted from May 6 through June 30, 2014, to analyze more than 600 firms, primarily RIAs that custody some portion of their assets with Fidelity. The complete report is available here.

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