Advisers Give Big Boost to Financial Wellness Programs

Participants who engage with a financial professional have better results than those who just use online tools.
Employees who engage in multiple live interactions with a financial professional experience a much higher degree of positive behavioral change towards financial wellness than those that engage solely online, a new analysis from Financial Finesse suggests.

The Year in Review: 2015, found overall financial wellness levels increased only slightly to 4.8 out of 10 vs. 4.7 in 2014. Liz Davidson, CEO of Financial Finesse, notes that the changes in each category of financial wellness are pretty small and it’s a large sample size. But, she tells PLANSPONSOR the biggest variable is the difficult economic times. “Wages are stagnating, there is concern about market uncertainty, and there is more pressure on employees to fund more of their own benefits,” she says.

The analysis shows that while technology was helpful in increasing employee awareness of their financial vulnerabilities, online interactions alone did not improve employee financial wellness. By contrast, employees who had five interactions, including conversations on the phone or in person with a financial professional, showed substantial progress. For these regular participants, 98% contribute to their retirement plan, compared to 89% of online-only users; 48% are on track for retirement, compared to 21% of online-only users; and 64% are confident in their investment strategy, compared to 42% of online-only users. In addition, 80% have a handle on cash flow, compared to 66% of online-only users, and 72% have an emergency fund, compared to 50% of online-only users.

NEXT: Gender gap narrows, differences by ethnicityA look at 31 key financial wellness questions revealed the overall gender gap in financial wellness declined from seven percentage points in 2014 to five percentage points in 2015. Davidson noted that 71% of employees that repeatedly used their financial wellness programs were women, and this has likely contributed to narrowing the gender gap. But, she also says she’s noted a resurgence of a different kind of feminism. “Women are more comfortable taking control of financial issues; it’s the early stages of social change,” she says. “We observe increased confidence.”

Seventy-one percent of employees chose retirement planning as a top concern in 2015, making it the most often cited concern, but it was actually getting out of debt that topped the list of concerns for African American (75%) and Latino (66%) employees.  The presence of problematic debt may be affecting retirement preparedness, Financial Finesse says.

Debt may also be affecting reported levels of financial stress. Three in ten Latino employees (30%), and nearly four in 10 African American employees (38%), reported feeling high or overwhelming levels of financial stress. Both cohorts indicated a lack of control over their current financial situation as the main cause of their financial stress. This lack of financial control has been a barrier to saving for retirement.

NEXT: Who to target in financial wellness programs

Davidson says plan sponsors should focus more on lower-income employees and those most financially stressed in financial wellness programs, and help them reduce immediate emergency stress.

Greg Ward, CFP, director of the Financial Finesse Think Tank, suggests employers that offer financial wellness programs consider tailoring communications to address these vulnerabilities in particular:

  • 58% may not be saving enough for retirement, with only 16% of Millennials on track to achieve their retirement goals;
  • 51% don’t have an emergency fund. While this declines with age, a worrisome 25% of employees 65 and older still don’t have an emergency fund;
  • 34% may be living beyond their means. For employees with family incomes of $100,000 or lower, less than half pay off their credit cards every month;
  • 33% may have serious debt problems. Debt may be hurting African American and Latino employees the most, with 75% of African American and 66% of Latino employees saying getting out of debt is a top concern; and
  • Concern over market volatility is high. Many employees grew nervous about their retirement plan savings in the past year and turned to their financial wellness program for guidance about how to handle these market fluctuations.
Davidson concludes: “Live interaction with a certified financial planner is important. Online wellness tools are a key component—they can reach more employees, and employees will make progress using them—but a human can coach employees and hold them accountable.”