Demand Performance

Financial wellness programs continue to gain acceptance with employers. The 2023 PLANSPONSOR Defined Contribution Plan Benchmarking report notes that 77% of plan sponsors currently offer a form of financial wellness programing. 

One reason for the programs’ acceptance has been their relatively low cost per participant. Craig Copeland, director of wealth benefits at the Employee Benefits Research Institute in Washington, says the 2022 EBRI Financial Wellbeing Employer Survey found that roughly 60% of employers were spending between $20 and $250 per employee annually. Seventeen percent were spending less than $20 per year, 14% spending more than $250, and 8% were not sure of their costs. 

But the expense has been increasing: 53% of 2022’s responding companies noted their costs being more than $50 per employee, compared with one-third citing this level in 2018 and 2019, according to EBRI.

With the rising costs, 85% of 2022 survey respondents had implemented cost-benefit analyses to evaluate their financial wellness program.

Employee satisfaction (55%) was the main factor employers considered. Productivity tied employee attraction and retention for second, at 42%, “showing that employers were also looking at the benefits of these programs relative to their costs outside of just employee happiness metrics,” the report states.

Building the Case

Numerous studies describe the financial challenges and stresses many employees experience. Financial wellness programs purport to address these problems, but their citing generic outcomes such as “increased employee happiness” or “increased productivity” without supplying specific evidence of success might not convince an employer to implement a financial wellness program. 

Demonstrating a benefit’s value requires measuring outcomes based on information from the employer or employee, says Rob LaBreche, president of iGrad, in Cardiff by the Sea, California; iGrad offers the Enrich financial wellness program.

“Not every organization we work with allows us to measure all typical benchmarks, but we do try to measure everything we can,” he says. For example, employees who completed the Enrich program’s 401(k) and retirement learning program increased 401(k) contributions by an average 34%. That change also reduced employers’ payroll taxes on the employees’ wages, he says. Other metrics based on Enrich users’ results found an increase in employees’ emergency savings and more employees paying off their credit card bills each month.

Evaluation data can come from multiple sources. Emilio Vela, director, participant engagement with Pensionmark Financial Group in Santa Barbara, California, says Pensionmark uses multiple metrics to evaluate its financial wellness program’s impact.

“[By way of] the data collected by the recordkeeper and our proprietary reporting, sponsors can easily measure employee engagement, satisfaction and program benefit usage,” says Vela. “We track participant contribution rates and data utilization to monitor progress. Importantly, with retention rates and CSAT/NPS [customer satisfaction/Net Promoter Score] scores, we can also assess [the plan-sponsor] client’s loyalty and satisfaction. These metrics give a clear and comprehensive picture of the program’s impact and enable us to guide the program’s future improvements.”

Edelman Financial Engines too uses multiple metrics to track and demonstrate its financial wellness program’s value. At the employee level, the firm tracks metrics related to: satisfaction and financial confidence; employee outcomes such as improvements in saving rates, portfolio risk and diversification assessments; and employee retirement income forecasts, as well as improvements to individuals’ personalized plans, says Keith Kotfica, senior vice president and head of employee planning for Edelman, in Boston.

“We’re also looking at engagement and usage of the various program components, including digital advice; educational resources such as webinars and online tools; discretionary 401(k) professional management or nondiscretionary advice solutions; calls to 401(k) advisers or financial counselors; and requests for advanced planning needs,” Kotfica says.

Managing Sponsors’ Expectations

Mark Smrecek, North American financial resilience leader with Willis Towers Watson in Chicago, notes that goals for employers and participants are often specific to a situation. “Key success metrics, for both sponsors and participants, differ based on business drivers and baseline program metrics, as well as program priorities and objectives,” he explains. “From a plan participant perspective, individual situations vary widely. Success not only differs by age, earnings, role and employer, but within each of these segments as well. Understanding the state of the current workforce enables plan sponsors to not only build a relevant financial wellness program, but also to set goals and priorities [that] will drive [return on investment] more deeply into the organization.”

It is important for sponsors to avoid a short-term, quick-fix mentality with financial wellness programs, Vela cautions. He says financial wellness programs should be designed to achieve long-term objectives, and Pensionmark talks to plan sponsors about how defining success should take into consideration more than just the direct impact to a workplace retirement plan.

“We show employers how providing resources and guidance across the broader landscape of personal finance encourages employees to engage with the program wherever they are on their financial journey,” says Vela. “That may not directly affect the plan balance within the first year, but research shows that the return can lead to increased productivity, reduced stress and an overall well-being boost that employees with access to financial wellness benefits experience.”

“Key success metrics, for both sponsors and participants, differ based on business drivers, baseline program metrics, as well as program priorities and objectives.”

Benefit to Adviser

Helping sponsors implement wellness programs also benefits the adviser’s practice, says Harris Gignilliat, senior institutional consultant with Trillium Partners, UBS Financial Services in Atlanta. “If I get a good wellness program initiated with an existing retirement plan client, it’s like sticky glue [with] that client,” he says. “Not only are they able to see the front end of what a 401(k) or a benefits package looks like, but now we can track how far the needle moves by incorporating a wellness initiative to go along with that to fill that education component.”

Vela says there are multiple business reasons for advisers to develop and deliver a comprehensive, multifaceted financial wellness platform. He says it is the most effective method Pensionmark has found, coupled with additional core plan design elements, for a plan’s participants to achieve their financial goals. This is a key indicator of plan success and a core part of the firm’s proposition, which helps Pensionmark retain existing clients and garner new ones, he says. 

“In addition, it takes the workload off the plan sponsor and gives the participants a better experience, both of which strengthen our relationship and value proposition,” he continues. “Lastly, for firms that engage participants in individual wealth, insurance or other business, it creates a one-to-one relationship with the participant that can result in additional opportunities for the adviser.”