Data & Research April 10, 2019

Tools, Not Just Education, Improve Recordkeeper Financial Wellness Offerings

“More robust programs—which go beyond just education—tend to cost more for plan sponsors. But, they include features such as on-site support, account aggregation, budget tracking and goal setting,” says Claire Daly, Corporate Insight.

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Recordkeepers consistently cover topics that cause concern among participants—such as taxes and emergency savings—in their financial wellness education offerings, but not so with financial wellness tools, Corporate Insight, a company that evaluates recordkeepers’ platforms, found in a two-part series analyzing financial wellness tools and education.

Financial wellness tools that automatically import relevant data—such as profile information, salary details and account balances—save participants a considerable amount of time and effort, and limits the possibility of human input errors, ensuring more accurate results, Corporate Insight says. However, it is important that firms let users modify imported information. Only 18% of recordkeepers included in Corporate Insight’s analysis automatically import participant data and also allow users to adjust the information. Corporate Insight notes that third-party tools and calculators do not include this feature, so firms with these tools are unable to adhere to this best practice.

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Corporate Insights’ February Retirement Plan Monitor report also says incorporating balloon tips, built-in calculators and contextual information can help participants enter their information correctly. Balloon tips should define or explain inputs and, when applicable, use examples. Almost every recordkeeper analyzed (94%) integrates balloon tips within at least one available tool. Forty-seven percent of firms include a built-in calculator within at least one resource.

As for financial wellness education, a recurring issue Corporate Insight found in its March Retirement Plan Monitor report was findability, as many recordkeepers lacked centralized education centers that make it easy to locate and browse materials. Leading firms cover a multitude of topics without compromising findability or format.

What makes for a successful financial wellness program?

Claire Daly, a research associate with Corporate Insight, tells PLANADVISER at the end of 2018, Corporate Insight published A Roadmap of the Financial Wellness Ecosystem, a syndicated study that takes a comprehensive look at financial wellness and the landscape of employer program offerings, and from that study, came up with its own definition of financial wellness.

“We consider a person to have achieved a state of financial well-being if they possess a manageable level of stress associated with current and future financial matters; a manageable level of debt—or no debt at all—that can be paid off without financial penalty or significant stress on an individual’s financial situation or lifestyle; enough disposable income to maintain a desirable lifestyle that is within reason and an ample emergency savings fund that can sustain an individual’s lifestyle for a bare minimum of three months; and a financial acumen that will allow them to plan appropriately for future goals and respond to unforeseen financial obstacles,” she says. “Therefore, a successful financial wellness program helps employees make progress towards, achieve and maintain these.”

According to Daly, there are a variety of different ways to analyze how effective a financial wellness program is at doing what. For example, the results of Corporate Insight’s 2018 survey showed that enrollment in employer-provided third-party financial programs is correlated with an increased likelihood of plan participation, contributing more to retirement and having more saved up overall.

Participation in a financial wellness programs also was associated with better emergency savings: 78% of survey respondents who said they were enrolled in their employer-provided third-party financial wellness program reported having an emergency fund. Of that 78%, a majority claim that it could last them at least two months, often longer. Comparatively, only 53% of those who claimed they did not use a financial wellness program reported having an emergency fund.

“These savings behaviors can help sponsors assess whether or not and to what extent financial wellness programs are impacting their employees’ overall financial circumstances,” she says.

Recordkeeper vs. third-party provider financial wellness programs

While Corporate Insight has not done a comparison of financial wellness programs between recordkeepers and third-party financial wellness providers, Daly says it received feedback from its financial wellness study that many plan sponsors find resources provided by recordkeepers uninteresting or ineffective.

However, she notes, several recordkeepers have partnered with third-party financial wellness program providers to offer robust offerings. In one such instance, some interesting aspects of the offering include its financial wellness assessment, which looks at participants’ financial knowledge and habits to provide personalized content suggestions, Daly says. In addition, participants can find curriculum-style lessons that include overviews of what participants will learn, knowledge quizzes and FAQs. The last page of each course reviews the material and suggests immediate action items, often linking to a calculator or tool for further engagement.

“More robust programs—which go beyond just education—tend to cost more for plan sponsors,” Daly says. “But, they include features such as on-site support, account aggregation, budget tracking and goal setting.”
Client Service April 10, 2019

Parents and Kids Both Influence the Flow of ‘Modern Money’

Shifting attitudes about supporting adult children financially have helped reshape Americans’ thinking about wealth and retirement readiness, according to Ameriprise Financial survey data.

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Ameriprise Financial has released a new report, “Modern Money,” which compiles the survey responses of more than 3,000 U.S. investors ages 30 to 69 with at least $100,000 in investable assets.

In offering a sneak peek of the findings to PLANADVISER, Marcy Keckler, vice president of financial advice strategy for Ameriprise Financial, discussed how attitudes toward conventional financial goals such as homeownership, supporting children, and retirement have shifted across generations.

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“The study sheds light on how these changes impact investors’ relationship with money,” Keckler said.

According to the Modern Money report, 78% of investors say achieving financial success has been the same or easier for them than it was for their parents at the same age, but over half (51%) think it will be harder for the next generation in their family to feel comfortable financially.

As Keckler observed, many of today’s investors are providing financial support to their children at a higher rate than they received from their own parents. She noted that a lot of this has to do with the ballooning cost of a higher education.

“Nearly two-thirds of respondents say their parents helped them pay for their college education,” Keckler said. “When it comes to helping their own children pay for college, 87% of respondents say they have or plan to assist with this milestone.”

The data shows one out of three respondents say they have delayed their own retirement or would do so to help their kids with this expense; however, only 10% of respondents say their parents made this same sacrifice for them.

“Parents delaying their retirement to pay for their children’s college education could be a potential red flag,” Keckler said. “As individuals juggle competing financial goals, they should have a plan in place to ensure they’re not sacrificing their financial future in order to fund other priorities. You only get one shot at saving for retirement.”

Keckler said parents that feel squeezed between supporting their adult children financially and planning for their own retirement must push their children to live within their means and to understand that financial independence might require making compromises—for example attending an affordable university or choosing to have a small wedding.

The Ameriprise survey data shows more than half (54%) of respondents say their parents helped pay for their first car, but an even greater percentage (80%) say they either intend to or have already helped pay for their own children’s first vehicle. In addition, the study shows that financial support from modern parents often continues in adulthood. Investors have assisted or plan to assist their kids financially with wedding expenses (78%) and a first home purchase (40%).

Comparatively, when reflecting back on their experiences as young adults, 51% of respondents say they received help from their parents for their nuptials while only 19% received help from their parents for their first home.

One interesting finding is that the vast majority (92%) of respondents who met the $100,000 asset floor for participation in the survey report owning their home. Despite many viewing homeownership as a good investment, it is not the primary reason they bought their home, the report shows. In fact, the No. 1 driver is that it gives them “a sense of pride in being a homeowner.” The remaining 8% of respondents who identify as renters say the top reason they don’t own is that renting provides more flexibility. These investors are applying the money they could have used to buy a home toward other financial goals—71% are using the money to save for retirement, as an example.

Keckler said she was a bit surprised to see that families still largely remain “mum about money.”

“Half of investors think discussions around money are still as taboo today as they were a decade ago, but this sentiment is gradually shifting,” she said. “The Modern Money study reveals younger generations are more open to discussing money matters with others.”

On this point, the data shows 26% of Millennials surveyed said they talk with their friends about how much they spent on a major purchase, compared with 18% of Generation X and 12% of Boomers. Millennials are also more likely to talk with their friends about their salary and how much money they have invested, compared with Gen X and Boomers.

“Talking about money pays off,” Keckler concluded. “Our research finds that investors who have more financial confidence are more likely to speak with others about money. Consulting a financial professional may be a good place to start, especially for those who find this topic difficult to discuss.”

Additional findings and information about the study are available at https://www.Ameriprise.com/modernmoney/.

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