Financial Wellness Programs Present an Opportunity for Recordkeepers

Most retirement plan participants rely on their workplace for financial advice.

Financial wellness programs present a major opportunity for recordkeepers, according to a new SPARK Institute report conducted by Cerulli Associates. The findings are based on both qualitative and quantitative feedback from 26 recordkeepers serving 443,000 plans with $5.9 trillion in assets and more than 80 million participants.

Financial wellness programs must expand beyond retirement savings to include financial budgeting, emergency savings accounts, cash flow optimization and debt optimization, according to the report.

“There is increased awareness among retirement industry stake holders that plan participants do not save for retirement in a vacuum,” says Dan Cook, a research analyst at Cerulli Associates. “The average participant has several competing financial priorities, which can be challenging to manage without access to personalized financial advice.”

The report notes that participants in the mass market (i.e. those with less than $100,000 in investable assets) and the middle market (those with $100,000 to $500,000 in investable assets) are most likely to rely on their workplace for financial advice, or to say that they have no source for advice, according to the report. Participants with more than $500,000 in investable assets are more likely to have a retirement adviser.

“As such, DC [defined contribution] recordkeepers play a key role in providing guidance to this group of underserved individuals,” Cook says. “Oftentimes, a financial wellness program is the most effective framework through which to deliver this guidance.”

To be effective, according to the SPARK Institute and Cerulli, a financial wellness program should incorporate technology and make it easy for participants to take action. Seventy-one percent of DC recordkeepers measure the effectiveness of their financial wellness programs by looking at how many workers participate in educational sessions. Sixty-seven percent look at such website activity as click rates and interactions per website visit.

“There are a variety of ways to track the progress of a financial wellness initiative,” Cook says. “For recordkeepers, it is important to focus in on key metrics that are most relevant to each plan sponsor’s top priorities.”