Healthy, Wealthy and Wise
The goal of financial wellness education programs is to change financial behavior while addressing the root causes of financial stress and mismanagement, which can be damaging to the workplace.
In fact, seven out of 10 human resource (HR) professionals cited personal financial challenges as hurting employees’ job performance, according to a 2014 Society for Human Resource Management survey on financial wellness and education. Two out of five (42%) reported medical expenses as the personal financial challenge most affecting employees—up 7 percentage points from 2011—and about the same number (41%) said that a lack of cash to cover personal expenses most affected employees at their organization.
Wellness is the latest in an evolution of workplace finance philosophies employers have aimed at employees as they shift away from providing education about the differences between stocks and bonds or value and growth investing strategies, moving toward a more holistic curriculum. “Those programs don’t help people put money in their retirement or savings accounts,” says Steve Wendel, behavioral social scientist at HelloWallet in Washington, D.C. However, they can still be an extremely valuable benefit.
Companies, themselves, can realize benefits from implementing a wellness program. Employees can spend up to two work hours a week on personal finances—hours the company can regain if it addresses their concerns, says Keith Soranno, director of partner development at Hello-Wallet, also in Washington.
Because financial fitness plays such a great part in an individual’s overall well-being, says Kent Allison, partner and national practice leader of PwC’s employee financial education and wellness practice, in Floral Park, New Jersey, solving some financial issues often solves health issues as well, thereby lowering a company’s health care costs.
According to data from Financial Finesse, a provider of financial wellness programs, the cost for company health care on employees who participated in a financial wellness program dropped by an average 4.5%, while costs for non-participants rose by an average 19.4%. “Financial stress and physical stress marry up quite well,” Allison says.
“There’s plenty of evidence that it’s to the employer’s benefit to have healthy people at work,” agrees John Hoffmire, citing the greater number of sick days and higher health care costs of financially stressed workers.
Targeted Messaging
The messages of financial wellness and physical health and wellness blend easily and definitely should be combined, says Hoffmire, who serves as chairman of the Personal Finance Employee Education Foundation in Madison, Wisconsin. The two bolster one another; merging the messages also streamlines communications and prevents them from competing.
Instead of a single annual communication for health care and health enrollment, for example, firms can opt to rebrand re-enrollment as a wellness day, combining financial and physical communications, suggests Kevin Crain, head of retirement relationship solutions for Bank of America Merrill Lynch in New York City.
Communication must target specific demographics of employees. Generation Y must learn to manage cash, make better spending decisions and restructure debt, Allison observes. Baby Boomers wonder how they will make a soft landing into retirement and want to know if they can make their money last. Generation X is somewhere in the middle, dealing with everything, so their wellness message should aim to help them address competing priorities.
Millennials are fans of mobile technology and social media, Crain says, and they like to get information via their smartphones. They are willing to use website information, and to chat online or through an instant messaging platform. They will never use a call center, though, as they have trouble being tied down to specific hours. “Their idea of face-to-face interaction is Skype or FaceTime. They don’t want to go to a building,” Crain says. “Baby Boomers, on the other hand, are increasingly drawn to mobile applications [apps], but they still like websites and call centers. They want to sit down with someone.”
Measuring Programs
When selecting an offering for a plan sponsor, advisers should look for a measurable impact and the results of a randomized clinical trial—an experiment with two randomized groups of participants, Wendel says. “If the vendor doesn’t have those trials behind it, watch out. It needs solid proof that its program works.”
Wendel suggests asking how the vendor measures what the program does and how it applies behavioral techniques. He also warns against the use of anecdotes and of nonrepresentative case studies.
Programs should be backed by quantifiable data—self-reporting methods that ask participants whether they liked a program can be red flags. The problem, Wendel says, is social bias—i.e., the personal bond that forms during a program or seminar, making people more reluctant to express negative opinions.
The before-and-after approach—in which people are tested prior to and after completing a financial literacy program—is another method Wendel warns against. Before the program, participants are tested on their knowledge of topics such as compound interest, then re-tested at the program’s end. “Of course they’ll know more. But this testing asks the wrong questions,” he says. “First, is specific, testable knowledge really what you care about? Second, the people who sign up for these are different from those who do not. Over time, any time you look at these people, they’ll be doing better. They were going to do better anyway.”
On the other hand, Wendel says, “Clinical trials eliminate the problem of the people who signed up being different from [those who didn’t],” and such studies are fairly easy for companies and vendors to perform.
Importantly, advisers must get to the underpinnings of a program, Allison cautions, to see if it can indeed address specific needs in the employee population—whether those be outstanding loans, competing priorities, underwater mortgages or living paycheck to paycheck.
Programs should reward positive behaviors and remove obstacles to taking action. “It’s similar to the health side,” Allison says. People who exercise on their own are less likely to succeed: They can too easily find reasons not to do it. But those who use a trainer, who have committed to seeing an expert, are more obligated to make a behavioral change and do better. Creating a group for social support is also effective, as group members look after and compete with each other, factors that also motivate new behavior.
Financial wellness is becoming a top-list item, according to Crain. “Plan sponsors see the need and are starting to feel that the majority of their workers need help,” he says. “More than 80% of employers surveyed said they feel somewhat responsible for their employees’ financial wellness. They realize they have to take quick action. They want to know what they can do.”
Wellness on the Rise
Financial wellness programs are expanding in popularity and
awareness. Steve Wendel, with HelloWallet, notes that a few high-profile
companies—Google and Lockheed Martin among them—lead the way in implementing
such programs, and other companies increasingly are following suit.
Most employees are ill-equipped to handle major financial decisions or know how best to allocate their paycheck dollars. This leads to financial stress, which can have an impact on productivity at work, says Keith Sorrano, also of HelloWallet. To combat such stress, it is in a company’s own best interests to help its work force handle finances more effectively, Soranno points out.
The real answer, says Kent Allison of PwC, is recognizing that employees greatly need help to be able to retire. Growing awareness of the country’s widespread retirement insecurity is undeniable, he says. Fewer pensions, rising health care costs and increased life spans are all significant contributing factors. “These issues are coming together in a perfect storm,” he says. —JC
Financial Wellness Plan Features
Financial wellness programs include certain characteristics
that distinguish them from financial advice or education. These are:
- Unbiased information. Programs are free of sales pitches;
- Ongoing in nature. Wellness is not a one-shot occurrence but a process, so programs provide support and accountability to help employees make, sustain and build upon positive financial habits;
- Holistic. Wellness programs address all aspects of financial planning, from debt management to more advanced estate planning; and
- Personalized. Employees receive support customized to their specific needs. —JC
Financial Education vs. Financial Wellness
Some people in the industry tend to use the terms financial
wellness and financial education interchangeably when talking about workplace
programs. However, that is not always accurate, warns Steve Wendel of
HelloWallet.
Financial wellness programs include action items that make it easier for people to develop better financial habits. Where education and wellness programs both commonly ask people to state their goals, Wendel says, a wellness program will follow up by suggesting specific steps.
After identifying a need, the wellness program helps break down a large, difficult task—e.g., saving for a child’s education or funding a certain lifestyle in retirement—into smaller, manageable goals such as creating a financial plan or saving $X per month.
Wellness programs drive actual savings using a variety of approaches—for instance, giving participants a score of how they are doing both overall and compared with people in similar circumstances; providing ongoing coaching; and creating information and support exchanges among participants, among other methods.
People commonly misuse the term financial wellness, says Kent Allison of PwC’s employee financial education and wellness practice. Some sponsors may simply change the name of an existing education program. “But when you look under the hood, it’s still education,” he says. “The focus is on increasing knowledge—not changing behaviors.” —JC