The point of financial wellness is that it helps reduce financial stress, Matt Iverson, founder of Boulevard R, a retirement plan services provider, said in a recent webinar. Employees who are stressed financially tend to have higher health care expenses—about $300 per employee per year stemming from anxiety, insomnia, headaches and depression, Iverson says.
This means pointing a plan sponsor toward financial wellness programs can absolutely be a value-add for an adviser, Iverson tells PLANADVISER. “It shows the adviser is up to date on what’s happening today and paying attention to trends in retirement readiness,” he says. “Even if the adviser isn’t offering a wellness program directly and is just trying to make sure the client knows what is going on and drive more satisfaction across the benefits plan, it’s still a positive. We’re seeing more advisers and broker/dealers focus on that, because their customers are asking about it.”
When employees can’t afford to retire, there is a real cost to the firm, Iverson says. An older workforce that delays retirement in order to accumulate sufficient assets can cost the employer about $10,000 in insurance premiums per employee per year, assuming employees in their mid-sixties, compared with employees in their 40s.
A quality financial wellness program has several components, according to Matt Gnabasik, managing director of Blue Prairie Group, an advisory firm that focuses on Employee Retirement Income Security Act (ERISA) issues. “It includes retirement, but it’s bigger than retirement,” he says.
The problem of lagging financial illiteracy is widespread throughout the U.S., Gnabasik says, and it can directly impact workplace productivity. “There are clear, compelling, causal relationships between people who are financially stressed leading to higher costs in the workplace,” he says, “more than if they weren’t financially stressed.”
For millions of Americans, Gnabasik says, six months of income in reserve is a pipe dream. “Most of us are not anywhere near to being on track for retirement, using 80% of pre-retirement income as a benchmark,” he says. The increasingly complex nature of paying for health care costs only adds to the problem.
An effective financial wellness program has several key points, Gnabasik says, including information on holistic spending and budgeting, debt management and retirement planning. Instead of simply taking a scattered approach to benefit programs, using financial wellness can bring everything together if it is delivered well.
The program should provide access democratically to everyone in a workforce. It’s not a C-Suite benefit, Gnabasik says, but serves those individuals without liquid assets. Individuals should receive customized, actionable information delivered across multiple media platforms. Activities can be measured and tracked, and the results reported back to clients.
Financial wellness is not about selling products, and there should be no real or perceived conflicts of interest. While the Web may be the easiest way to reach out to participants, Gnabasik says, in-person channels should be provided as well.
No matter how strong a company’s retirement plan, Gnabasik says, workers often don’t bother to figure out the best way to participate or take advantage of it. The problem is made worse when plan sponsors take the attitude that it’s up to the participants to educate themselves. “The employer has a huge economic incentive to help participants figure it out,” he says. “You can make a strong, rational economic argument that it is good business for the plan sponsor to put together a financial wellness program.”
Iverson agrees, pointing out that even a small amount of marketing effort about the plan and its benefits can boost employee enthusiasm for a company’s benefits package. “If possible, communicate or benchmark the plan to industry averages,” Iverson says. “It puts the plan it in perspective for them. They may not necessarily know how it compares to other plans.”
Another important step, Iverson says, is to remind employers the biggest line item expenses besides payroll are often health care and running, maintaining and matching the retirement plan. It’s a significant investment, he says, so why not highlight how valuable it is?
The average cost to implement a financial wellness program depends on the features and services. Iverson says an average program for 10,000 participants would cost about $50,000, but could be less, depending on the relationship of the adviser to the plan. It doesn’t always add a lot of cost, he says.
Several online calculators can help assess the return on investment (ROI) for implementing a financial wellness program, including the Personal Financial Wellness (PFW) scale available from the Personal Finance Foundation, and Boulevard R’s own Retiremap.
Iverson admits that implementing financial wellness programs can have a downside for some organizations. Famously, he notes, MacDonald’s put together a financial wellness program that highlighted budget issues, which had the unfortunate effect of underscoring the financial challenges their employees face. “Big-box retail operations with high turnover, low tenure and low wages can be a challenge,” he says. “The investment you make in helping employees improve their financial habits, it’s hard to justify that cost in these cases. You might not get that ROI.”
Financial wellness and better plan engagement seem to go hand in hand. As employees become more financially fit, they tend to increase savings and deferral rates. “You don’t have to make the match formula any richer if you can do a better job of engaging employees around the retirement plan as a benefit,” Iverson notes. “You can dramatically improve their overall engagement in the plan and overall satisfaction with the plan and their benefits.”