Partnership Hoists Importance of Financial Wellness

During employee meetings, no one raises their hand when you ask who wants to depend on Social Security for retirement, says Kathleen Kelly, managing partner of Compass Financial Partners. “Everyone understands that they are responsible for managing finances to support their own retirement,” she tells PLANADVISER. But as plan advisers often observe, retirement plan participants face a range of financial challenges.

Kelly calls them roadblocks, and says Compass wanted to help plan participants address these other issues, and decided to take its relationship with Financial Finesse a step further. (See “Compass Integrates Financial Wellness Program.”) “Liz Davidson [chief executive of Financial Finesse] is a pioneer in the industry,” Kelly says, “an incredibly successful woman who really understands that implementing a financial wellness program in a company has good return on investment for the employers.”

Until now, Financial Finesse has not partnered with any advisers, but Davidson says that Compass has a number of differentiating characteristics. “They’re in a strong position as a large independent adviser, growing rapidly,” Davidson tells PLANADVISER. “They have the luxury of thinking long term, asking where the market is going, especially as it relates to participants and retirement readiness.”

Compass has a mission-based perspective, Davidson feels, looking at how to solve the problem of retirement readiness for plan participants. “The retirement plan advisers who are most successful at helping people retire on time with sufficient assets are the ones who are going to grow, and their growth will be at the expense of those working with quick and ineffective solutions,” Davidson says.

Davidson points out that during the RFP (request for proposal) process, advisers often give just cursory attention to financial wellness. They might depend on older approaches, she says, such as lunch-and-learns. Or they won’t provide any details at all about what they will offer clients in terms of education and communication.

The traditional focus of the retirement plan industry has been how to educate participants, Davidson says. “It’s all about the enrollment meeting, but not looking at participants’ other financial issues,” she says. When people don’t take positive action or engage more with the plan, employers should not be surprised. The problem is often not with the plan, but with people’s bigger financial picture. 

“Most people love the plan and understand it’s favorable,” Davidson says. They need help in knowing how to afford it in the face of debt, a mortgage, college tuition, and daily bills—in short, in understanding how to look at finances more holistically.

The partnership will bring more infrastructure, content and subject matter capabilities to Compass, Davidson says. the partnership will also involve event management and marketing, online registration, e-blasts, posters, postcards and various other financial wellness materials. “They can cover more topics, have a more holistic approach and have streamlined implementation,” Davidson says. An event management system can even track which employees have gone through an online assessment and show how well the combined financial wellness program is working.

“Participants need to see that the plan is about them,” Davidson says. “And that is the way you change behavior, by making it about the person, not the plan, or the benefit, or the technical aspects.”

Kelly says the partnership will help the advisory firm’s plan sponsor clients improve retirement readiness for their workforces. “We look at the partnership as an additional building block to deliver best-in-class financial wellness to a broader swath of participants,” Kelly says.

Compass also wanted to dedicate more resources to financial wellness, because of their need to provide independent due diligence and best practices in fiduciary governance to plan fiduciaries. Financial wellness for plan participants is part of their strategy to improve overall plan success, Kelly says.

Kelly says financial wellness programs lift participant engagement. About 75% of plan participants who had a sit-down session with a financial planner changed something about their participation, ranging from an increase in plan contributions to a change in asset allocation or other positive action.

“If the building blocks aren’t in place for participants to make decisions, because they’re concerned about debt or have other issues, that is going to prevent them from maximizing the full benefit,” Kelly says. “We believe helping employees become more empowered in their decision-making and in their overall financial picture what will help them to retire with dignity.”