Healthcare employees rank the absolute lowest in financial wellness, with below average grades in the areas of financial stress, retirement planning, investing, debt, and money management. Read Financial Finesse’s case study of a Fortune 500 Healthcare Company’s successful financial wellness program to learn how to tackle the unique HR and benefits challenges facing healthcare professionals.
Liz Davidson, founder and CEO of Financial Finesse, answers some of the most common questions about workplace financial wellness programs, such as how to have an impact on every employee generation present in the workforce; where fintech tools fit into your program; how to decipher between financial wellness programs and financial education programs; and more.
Our best practices guide for workplace financial wellness programs defines what it means to be financially well, and what constitutes a workplace financial wellness program to help employers avoid ‘bait and switch’ providers who are marketing themselves as financial wellness providers when in reality, they are aiming to sell employees a financial product or service. This guide aims to set industry standards around financial wellness programs in the workplace.
The Financial Finesse Gender Gap in Financial Wellness report is an annual review of the financial wellness gap that exists between women and men in the workforce. It examines a variety of financial behaviors and outcomes, as well as the societal, psychological and practical barriers to gender parity when it comes to cash flow issues, retirement preparedness and other aspects of financial wellness. The report offers suggestions for employers and individuals to help close the gap and promote total financial wellness for all employees.
American employees continue to experience high levels of financial stress, and could be losing sleep over it. In this research report, we look at which employees are the most stressed about money, and what employers can do to help their employees develop the solid money management and investment planning skills they need to find lasting financial peace of mind.
Employees Say Benefits Drive Their Engagement with Their Employer, But The Vast Majority Don’t Maximize The Benefits They Have
Employees who understand, maximize and appreciate the value of their employee benefits are happier at work and more productive and engaged. This isn’t just a guess — the research agrees. Per SHRM’s 2016 Employee Job Satisfaction and Engagement Survey, 84 percent of employees indicated that their benefits were critical to their financial wellbeing, and 60 percent said that benefit were a key factor in their decision to join or stay at a company. Yet, most admit not fully understanding the benefits they have and virtually all are not fully maximizing them— accidentally leaving money on the table each year, not even realizing it. Based on our own research working with hundreds of thousands of employees over the years, many are leaving upwards of a million dollars on the table by not maximizing the benefits they have — and instead using that money for “nice to have” purchases that decline in value or going outside their employer to invest in more expensive financial products and services which often don’t have the same tax advantages. In some cases, employees are actually paying out of pocket for benefits the company would otherwise fully or partially subsidize, such as gym memberships, daycare, commuter benefits, legal support, tuition or continuing education reimbursement or relocation expenses. The list goes on.
Even Benefits Managers Don’t Understand Their Entire Benefit Offering
When we work with benefits managers to integrate all employee benefits into their financial wellness program, the most common refrain we hear is, “I didn’t know we had that benefit!” If that’s sometimes the sentiment of those who manage benefits for a living, imagine how employees in the field must feel. Imagine how differently they might feel if they knew all the company was providing them and could take full advantage of every benefit that truly provided a benefit to them personally.
Because of this disconnect, it is absolutely critical your workforce financial wellness program should integrate all benefits so that employees recognize their benefits are a critical part of their financial wellness and have guidance as to how to maximize them as part of their overall financial plan. This helps employees understand where to go to find resources and the role each benefit plays in their financial lives.
It also should be used as the key vehicle to help employees manage benefits changes, so they minimize the impact to their finances and even manage to find ways to make the change work to their advantage.
The Most Successful Employers Offer Employees Unlimited Personalized Guidance On Their Benefits
The most successful benefits planning programs — which help employees maximize their benefits based on their own personal financial situation — employ a “concierge” strategy where the employee has access, both online, through a mobile app, over the phone, and in person, to their own personal financial coach who can help them make the right decisions for their life situation and goals. As a best practice to reach a large number of employees in a deeply personalized the coaching should meet the following criteria:
Managing Benefits Changes
Benefits changes are a fact of life today, whether they are for cost-savings reasons, to add more value, flexibility or support to employees, or simply to simplify or streamline a benefits offering to make it easier for employees to manage. Unfortunately, even good changes can add yet another thing for an employee to understand and act upon, and most major changes transition more costs to employees, adding to their financial stress.
If you handle benefits planning through the process described above, benefits changes become much easier to manage, because employees automatically have a coach to turn to in order to make the right decisions for their situation.
However, in virtually all cases, best in class employers do more than simply leverage their existing coaching. Without broad-based communications and education around the changes, and multiple touch points to ensure that all employees affected are aware of the change, it’s easy for important decisions to “fall through the cracks.” Your financial wellness provider should help you proactively communicate and educate employees around all changes —consulting around all aspects of the change management process, producing materials, videos, and tools as needed to help employees navigate the change, and delivering webcasts and workshops to all those affected by the change. They should also provide you with full reporting of employee engagement in these different communications and education campaigns, both for legal documentation but also so you understand what type of communication resonated the most for the purpose of designing future campaigns.
Among the most common changes that require this level of communication and education–
One last note
Benefits and personal finances are complicated and highly personal. Beware of any vendor who presents a one size fits all solution that is “turnkey” and “highly scalable”. While their solution may fit into part of a larger strategy, they are typically not set up to provide the level of customization you need to address either employee benefits planning or communication of benefits changes. Your employees care much more about their financial security than any singular benefit you provide. Your ability to bridge the gap between the myriad of benefits and the strategy they need to employ to become financially secure by maximizing these benefits is what matters most. The days of siloed benefits offerings and floods of email announcements on different benefits options are over. It’s now about what it always should have been — the employee who you want to benefit in the first place.
What motivates employees to take action to improve their financial health? The single most important part of providing a financial wellness program is motivating lasting changes to the way employees manage their finances. Without doing this, you won’t be able to meet the objectives for the program, including cost savings from an increase in benefits participation and retirement preparedness, reduction in plan leakage, absenteeism, wage garnishments, health care and workers’ compensation costs.
The key? Deliver a workplace financial wellness program that is rooted in the fundamentals of behavioral finance.
Understanding Behavioral Finance
Behavioral finance is the study of why people make irrational financial decisions. Why do we do things with our money that we do? Here’s what we’ve found that has the most impact on employee financial wellbeing:
Willpower is naturally limited According to the American Psychological Association, willpower can be depleted. Your financial wellness program should make it more likely that employees will actually act on the decisions they make. This includes making decisions easy to implement, like a 1-click enrollment in auto escalation of retirement plan contributions. Create a single sign-on so other benefits providers are accessible from your online financial learning center.
Decision fatigue We also get tired of making decisions. Social psychologist Sheela Iyengar estimates that we make at least 70 decisions per day. Providing your education earlier in the day when employees have not yet made many difficult decisions will make it easier for them to act on what they learn.
People are More Emotional than Rational Biases in financial behavior are common. At one point or another, we are all likely to do things like be overconfident, get attached to a reference point that is no longer valid, have clearer views in hindsight, look for confirmation of our opinions, follow the herd and overreact to recent events. Financial education and coaching from an unbiased planner – someone with no ulterior motive to sell financial products or services – helps employees recognize and deal with behavioral biases.
The Financial Behavior Change Model
Financial behavior change can’t be forced, but it can be facilitated. Studies show that if a financial coach knows when an employee is ready to change a certain financial behavior, they can customize their coaching or education to facilitate that change (see one academic study here). The principles of financial behavior change are that it must:
Financial Coaching Is What Helps Get Employees “Unstuck”
Per the Society for Human Resource Management (SHRM), younger employees in particular expect to access information about wellness programs on their computers and smartphones. It’s the interaction with a financial coach, however, that changes employee financial behavior. According to Financial Finesse’s 2015 Year in Review research, while technology was helpful in increasing employee awareness of their financial vulnerabilities, online interactions alone did not improve employee financial wellness. The more an employee interacts with a financial coach, the more progress they are likely to make. Online only users nationally in 2015 had an average Financial Wellness Score of 4.8 (on a ten scale), while repeat users of workplace financial wellness programs had an average score of 5.7. An incremental increase in financial wellness could save a large company millions from reduced costs of absenteeism and wage garnishments, tax savings from increased HSA and FSA participation and health care savings.
What’s the best way to design a workplace financial wellness program? At their core, effective programs meet the strategic needs of your business. Key areas that drive the creation of workplace financial wellness programs are:
According to a Consumer Financial Protection Bureau report, “a financially capable workforce is more satisfied, more engaged, and more productive for their employers.” That’s why 93 percent of companies surveyed in a 2015 Aon Hewitt report are likely to create or broaden their efforts on financial wellness.
Determine the Right Approach for Your Workforce
Workplace financial wellness offerings can range from highly effective, comprehensive solutions fully integrated with company benefits to online-only tools or programs that address specific employee populations. There are three broad approaches:
Benefits-Based Approach A workplace financial wellness benefit can be the one benefit that pulls all the other benefits together, increasing employee understanding, use and appreciation of their value. In particular, when your strategic goals are to engage employees, reduce financial stress, encourage benefits appreciation and realize measurable cost savings by reducing financial stress or benefits appreciation, the best solution is making financial wellness an ongoing employee benefit available to all employees. The foundation of a benefits-based approach to financial wellness is ongoing guidance and coaching that promotes behavior change. Depending on workforce needs, this includes some combination of workshops, webcasts, one to one coaching (telephone, in-person, or both) and online learning.
The benefits-based approach embeds financial wellness into your company culture and establishes your company as a partner in employees’ financial security. This is a powerful contribution to your recruiting brand. Over time, research shows a benefits-based approach can provide significant ROI for a large company.
Program-Based Approach The program-based approach can be a good fit for companies who may not have a strategic need for workplace financial wellness as a benefit offered to all employees, but have a need for support for specific employee populations. Typical employee populations to address with a targeted financial wellness program include pre-retirees, employees offered early retirement, recent college graduates and employees who have requested a retirement plan loan or received a wage garnishment. Companies may also choose to target executives by offering them an unbiased review of their financial plan by an experienced financial planner.
Tool-Based Approach Financial wellness websites and apps are generally used as tools in a more comprehensive program. There are some circumstances where a tool-based approach on its own may be a fit: when you are looking for a lower cost solution to check the box, when you have a very specific issue you want to address— such as helping parents navigate the college planning process, refinancing student loans for employees, offering employees in plan advice to help them better manage their 401(k) investments, or decision making tools that help them select the right health care plan during open enrollment. The right tools can make an impact here, provided you are working with a best in class provider and your population truly needs the service. However, they don’t generally make an enduring impact on overall employee financial wellness, retirement preparedness, or even benefits satisfaction. To do that, a holistic approach is needed. This is why employers are increasingly folding these tools into fully integrated financial wellness programs that utilize a “concierge” service approach where employees are directed to the right tools and benefits based on their needs, while working with a counselor that can help them continually improve their finances over time.
Understand What Your Employees Really Need
Everything starts with data. Once you have decided on whether to implement a benefits-based, program-based or tool-based program based on your strategic needs, you still need to validate the needs of the employees you are trying to reach with the program. There’s nothing worse than spending a large amount of time and money to launch a new program, only to discover that you could have spent half that amount and gotten much more appreciation and utilization from employees who actually needed a completely different service.
For example, you may think student loan debt is a major issue looking at your population— but what if the bigger issue is not knowing how to effectively budget to pay off the debts? You can help provide loan consolidation support for employees in this scenario but the effect will be marginal, as their foundational habits around how they manage their money won’t change. Similarly, in plan advice can be great— but it’s more expensive than target date funds and if employees who rely on their retirement plan as their sole investment vehicle choose in-plan advice thinking it will provide them with a bullet proof investment strategy when a cheaper target date fund would serve essentially the same purpose, you may have actually exposed yourself to legal liability down the road when they realize the extra fees were not justified for their situation.
Why A Workforce Financial Wellness Assessment™ is a “Must Have” Before Making Any Decisions on What To Offer Employees
The only way to truly understand what employees need, whether you are looking to add tools, programs, or a holistic benefit is to better understand their finances, in a confidential, non-invasive way. The best way to do this is to provide them with access to an online financial wellness assessment which they can use to get a snapshot of their personal financial wellness and key next steps to take to improve their finances, including a Financial Wellness Score™ they can use as a gauge to track their progress. Employees take five minutes, answer non-invasive questions about their financial habits, behaviors, and decisions they’ve made — without any account information collected — and you get an aggregated Workforce Financial Wellness Assessment™ detailing the following:
The American workplace is constantly changing. At one time, people generally stayed with one employer throughout their entire career and then retired with a gold watch and a big pension until they passed away. Then over the last 25 years, employers increasingly shifted from those traditional defined benefit plans to defined contribution plans which left the control, and the risk, in the hands of employees who were often ill-equipped and unprepared for that responsibility. From 1980 to 2008, the percentage of private employees with a defined benefit pension fell almost in half from 38 percent to 20 percent, while the percentage with only a defined contribution plan rose from 8 percent to 31 percent.
This trend isn’t limited to retirement benefits. More recently, we’ve seen a shift toward consumer-driven health care plans that place more risk and responsibility for healthcare spending on employees as well. According to a Willis Towers Watson/NBGH survey last year, 86 percent of employers were considering offering a consumer-driven health care plan this year, and over a third were planning to make it the only available option.
The workplace is beginning to go through another evolution in which employers become more than just a source of pay and benefits. As employees bear more of the responsibility for their financial wellbeing, employers are increasingly finding it to be in their best interest to help their employees advance their total financial wellbeing. For example, 93 percent of companies surveyed in a 2015 Aon Hewitt report are likely to create or broaden their efforts on financial wellness in a manner that extends beyond retirement decisions. Employees appreciate it too, as 81 percent in a TIAA survey reported that they trust financial information offered by their employer. There are several reasons that help explain this trend:
It’s a lot easier to understand the value of a pension or a comprehensive medical plan that the employer pays for than a 401(k) or an HSA that the employees may be solely responsible for funding, or at least share responsibility. A financial wellness program can help employees understand, utilize, and more fully appreciate these benefits. In turn, this can help employers recruit and retain talent.
A 2016 survey by Bank of America Merrill Lynch revealed an increase in the percentage of Americans reporting financial stress to 60 percent, up from 50 percent in 2013. In fact, our 2016 Financial Stress Research found that one in four employees reported financial stress that was “high,” or “overwhelming” – levels that could be considered unmanageable. According to an AP/AOL health poll, high levels of financial stress are correlated with higher occurrences of headaches, insomnia, high blood pressure, stomach ulcers, muscle tension, and severe anxiety and depression. Those experiencing high levels of stress also experience more relationship and substance abuse issues. There’s a rising awareness among employers that this stress can have a negative impact on a company’s bottom line due to factors like higher health care costs, absenteeism, lost productivity, and on-the-job accidents. For example, our most recent study of one Fortune 100 healthcare company calculated that employer healthcare costs associated with employees who used the company’s financial wellness program actually decreased by 4.5 percent, while the costs associated with employees who never used the program increased by 19.4 percent
In addition to suffering greater financial stress, Americans are increasingly delaying their retirement. A 2014 Gallup poll found that the average retirement age rose from 60 to 62. Many employees continue to work because they are underprepared or they don’t know if they are prepared to retire. 69 percent of Boomer employees do not believe or do not know if they have enough money to live comfortably to age 85, according to a Bankers Life Center for a Secure Retirement® study. This delayed retirement trend may only accelerate with the potential of future cuts in Medicare and Social Security and lower investment returns due to relatively low interest rates and high stock valuations. Employees who would like to retire but delay could cost their employer $10,000 to $50,000 for each year they work past normal retirement age due to higher health care costs and salaries versus younger employees who would have otherwise taken their place. This doesn’t include the cost of lower employee morale/productivity and higher turnover of high performing employees who aren’t advancing.
One of the biggest contributors to delayed retirement is not saving enough. However, financial wellness programs can make a difference by not only educating employees on the need to save more, but also helping them learn the basic money management skills to come up with the money to save. Our 2015 Year in Review Research showed a direct correlation between average 401(k) deferral rates and the number of interactions employees had with their financial wellness program. Those with only one interaction averaged less than a 6 percent deferral rate, while those with 5 or more interactions had an average 11 percent deferral rate, almost twice as much. Our research also shows that repeat users had an 88 percent improvement in the percentage on track for retirement.
Another factor is how well the employees invest the retirement money they save. However, our research found that only 46 percent of male employees and 36 percent of female employees felt confident in their investments. A workplace financial wellness program can help employees understand their investment options and make the right choices for themselves.
Our recently released ROI Special Report also found a direct relationship between an employee’s financial wellness and their average annual cost to the employer from other factors like absenteeism, garnishments, and payroll taxes. The study found that those with the lowest Financial Wellness Score™ of 0 to 2 cost an average of $198 per employee while those with the highest scores of 9 to 10 actually saved $143 per employee per year. Increasing the median financial wellness score of a 100,000 employee company from a 4-5 would save over $433,000 in decreased garnishment costs, over $682,000 in payroll tax savings from increased usage of flex spending/HSAs, and over $4 million in reduced absenteeism. Increasing the median from a 4 to a 6 would save over $886,000 in garnishments, $1.7 million in flex spending/HSAs, and over $8.5 million in absenteeism.
Employers used to bear the risk and burden of providing for the health and retirement security of their employees. As that burden has shifted onto employees, employers are finding themselves in a new role. The American workplace has become more than just a place to earn money — it’s now a place to learn how to make the best use of that money.
While some employers do take a tool-based or program-based approach to financial wellness in order to address niche needs of specific employee demographics, the marketing of those programs is by nature, much more narrow and limited in scope. There’s typically a launch to the target population, and periodic reminders at benefits fairs and the like. With everything employers have to communicate to employees, large scale marketing campaigns around a single tool, perk, or program distract from larger more important goals and can leave employees with information overload and decision-fatigue. You need the important information to stand out, and each time you send any additional communication to an employee, you take their attention away from the core messages you want to send.
With that in mind, this post is intended for those employers who specifically are focused on offering financial wellness as an employee benefit.
Let me clarify what I mean by offering financial wellness as an employee benefit. A financial wellness benefit is not a tool, app, niche service, program for a specific population group, a perk, or bullet 178 on the list of things you do to make your company a great place to work. On the contrary, it is an additional employee benefit, subsidized by you, the employer, to provide every single employee with access to employee unlimited personalized financial coaching to help them maximize their pay and benefits— free of any conflicts of interests or sales pitches. When you offer employees a true financial wellness benefit, you are making a commitment to their financial security by providing a resource they can turn to at any time, for any financial need, and know that the guidance they get is solely in their best interest, designed around their specific financial priorities, goals, and circumstances.
Accordingly, you need to market your financial wellness benefit the way you would any core benefit.
This starts by always calling it a benefit— not a program, service, platform, tool, resource, app— but an additional employee benefit that you are offering to all employees as part of their overall benefits package.
It also means leveraging all the traditional methods you use to communicate important benefits, including:
This strategy accomplishes several important objectives:
How much money can a highly effective financial wellness program save your organization? The answer, for most large companies, is well into the millions — and that’s focusing on the costs that are easiest to measure: wage garnishments, absenteeism and utilization of FSAs and HSAs. With additional analysis, companies can also measure the savings from reductions in healthcare costs and delayed retirement. Modeling and survey research can benchmark and measure improvements in employee engagement, productivity, retention and morale. While the most toxic effects of unchecked financial stress, like embezzlement, workplace violence and a culture of negativity, are nearly impossible to calculate, it’s intuitive that reducing financial stress would also reduce those problems.
The Starting Point for Calculating ROI: Financial Finesse’s Predictive Model
The national average financial wellness score is 5, based on Financial Finesse’s 0-10 financial wellness scale which benchmarks each employee’s financial wellness based on an online assessment. A Workforce Financial Wellness Assessment™ aggregates and analyzes this data on the company level. The chart to the left shows the projected costs savings of an incremental shift in the median workforce financial wellness score from 4-6, which has the potential to save a large employer of 50,000 employees approximately $5.6 million a year.
The cost savings illustrated in the above chart are simply a starting point of what is easy to measure — the tip of the iceberg of a much more in-depth analysis that needs to be done to more accurately calculate the true financial impact.
A strong behavioral-based financial wellness program drives results in areas that are much more strategically important to the success of your organization, such as:
Healthcare Cost Savings
A 2014 study from the American Psychological Association reports that 64 percent of those surveyed cited money as a significant source of stress, and that Americans are paying for this stress with their health. Financial stress has been attributed to decreased employee productivity, increased absenteeism and increased employer healthcare costs.
Financial wellness programs are correlated with lower healthcare costs. Our own study of a Fortune 100 healthcare company found that employer healthcare costs associated with employees who used the company’s financial wellness program actually decreased by 4.5 percent, while the costs associated with employees who never used the program increased by 19.4 percent. This equated to a cost savings of $271.50 per employee. If a 50,000-life employer experienced the same cost savings by offering a comprehensive workplace financial wellness program, it could save the employer over $13.5 million a year.
POTENTIAL ANNUAL HEALTHCARE COST SAVINGS
$271.50 (net healthcare savings per employee)
X 50,000 (average number of employees)
= $13,575,000
Reducing Costs of Delayed Retirement
Employees today are woefully underprepared for retirement, with only 21 percent indicating they are on track to achieve their income goals in retirement according to recent research from Financial Finesse. As employees progress through the late career cycle, those who are underprepared may have to delay their retirement for financial reasons. This has repercussions throughout the company in terms of increased health and disability costs as well as the velocity of talent development. According to the Transamerica Center for Retirement Studies®, 65 percent of Baby Boomers either plan to work past age 65 or do not plan to retire at all. For every year an employee who would like to retire delays retirement for financial reasons, the employer faces estimated additional costs between $10,000 and $50,000.
Our research shows that as employee’s overall financial wellness levels increase, so do contributions to retirement plans. Higher contribution rates reduce the likelihood of delayed retirement, since employees are more financially prepared. For younger employees, our research suggests that increases in contribution rates due to improved financial wellness could increase lifetime retirement savings by as much as 12 percent to 28 percent.
Our research also found that employees that engage repeatedly in their employer’s financial wellness program increase their likelihood of being on track for retirement—from 34 percent to 47 percent according to our findings*. For a 50,000-life employer, this 13-point improvement could equate to a $6.5 million annual cost reduction related to delayed retirement.
POTENTIAL COST SAVINGS FOR HELPING EMPLOYEES RETIRE ON TIME
13% (improvement in employees on track to retire)
X 10% (estimated % of workforce nearing retirement)
X $10,000 (estimated annual cost per employee for delayed retirement)
X 50,000 (average number of employees)
= $6,500,000
*Data based on study conducted for Fortune 100 employer using Financial Finesse’s services. Individual company results may vary.
Recruit, Retain, and Engage Top Talent
According to the 2016 Deloitte Millennial Survey, two-thirds of younger employees plan to leave their current job by 2020, with 25 percent saying they plan to leave in less than a year. Turnover costs companies money. Citing the research of W. F. Cascio, the SHRM Foundation’s report, Retaining Talent, indicates that “…direct replacement costs can reach as high as 50 percent to 60 percent of an employee’s annual salary, with total costs associated with turnover ranging from 90 percent to 200 percent of annual salary.” That puts costs anywhere between $45,000 and $100,000 when replacing an employee making $50,000 a year. A 2016 Paychex survey found that approximately 70 percent of employees cited low pay as a reason they have left or would leave a job, and 45 percent said they have or would leave due to a lack of benefits.
In our experience, most employees are dissatisfied with their pay and benefits because they haven’t fully maximized the value of what their company offers. They leave thousands (in some cases tens of thousands) of dollars on the table annually by not taking advantage of free or low-cost benefits such as company matching programs, discounted voluntary benefits, health and wellness benefits, and the small benefits that add up over time like commuter benefits, free parking, tuition reimbursement and others. The money they are foregoing could be the difference between sinking deeper into debt and proactively saving towards key financial goals.
Consider a scenario where a 50,000-life company with a 10 percent turnover rate institutes a comprehensive workforce financial wellness program. If that program resulted in 50 fewer employees leaving the company (i.e., a 1 percent reduction in the turnover rate), it could equate to over $2.2 million in annual savings:
POTENTIAL COST SAVINGS BY REDUCING TURNOVER
1% (projected reduction in employee turnover)
X 10% (turnover rate of employees)
X $45,000 (estimated net cost to replace employee)
X 50,000 (average number of employees)
= $2,250,000
Measuring Your Organization’s ROI
Using Financial Finesse’s predictive model, companies can set research-based benchmarks for their financial wellness program, customized to their employee demographics and financial wellness levels. This starts with a Workforce Financial Wellness Assessment™ to determine the median levels of employee financial wellness and financial stress, followed by implementing optimal outreach based on your workforce demographics. Improving median financial wellness is a process that takes time – there aren’t instant fixes that happen in one quarter. Companies can integrate data based on key measurement variables and benchmark results on a year-over-year basis. For the hypothetical 50,000-employee company discussed here who implements a comprehensive workplace financial wellness program according to industry best practices, pulling all those results together could result in total cost savings of nearly $28 million.
| Garnishments | $ 443,413 |
| FSA/HSA contributions payroll taxes | $ 887,229 |
| Absenteeism | $ 4,264,396 |
| Health care | $ 13,575,000 |
| Delayed retirement | $ 6,500,000 |
| Turnover | $ 2,250,000 |
| Estimated Total | $ 27,920,038 |
Interest in financial wellness is exploding, and many companies have questions about what a financial wellness program is and how to implement one. Corporate benefit managers seeking financial wellness solutions are asking themselves, “Is this a wellness initiative? A benefits initiative? Both? How do I find the solution that best fits our company?”
Erik Carter has worked in personal financial planning at every level, from a small brokerage office to the halls of Congress. Currently, he’s a Senior Resident Financial Planner with Financial Finesse and also works on their social media team. Erik spoke with us about his company and the troubling lack of financial education among Americans.
Employees least likely to be on track for retirement are also the least likely to obtain retirement and investment advice from a financial adviser, which makes employers best positioned to help employees improve their retirement preparedness.
Three-quarters of about 400 large companies surveyed by Aon Hewitt survey say they’re planning to focus more on financial wellness this year. And that means this sort of program could be coming to an employer near you.
But what are financial wellness programs? How do they work? And should you take advantage of such plans if offered one in your workplace? For the answers to those and other questions, we turned to Liz Davidson, the CEO and founder of Financial Finesse, an El Segundo, California, based provider of financial education programs. Below are her responses to our questions.
What is a financial wellness program?
I want to define financial wellness, since the term is commonly misused by financial services firms selling financial products or services, managing assets or even providing advice.
Financial wellness, from an employees’ perspective, is a state of financial well-being, where they have:
From the standpoint of employers who are offering financial wellness programs as an additional employee benefit, the programs must meet the following criteria to qualify as a true financial wellness program:
What’s the purpose of such a program and what features would a good program have?
The purpose of a program is two-fold: From an employer perspective, a financial wellness program can provide lower employee turnover, lower healthcare costs as a result of less financial stress taking a toll on employees, and lower absenteeism to name a few. Read Actual Results from Company’s Financial Wellness Program to view a return on investment (ROI) study on stress and health care changes as a result of financial wellness programs. One thing that bears mentioning is that these programs significantly impact employees’ retirement preparedness, which is good for the employee and the employer. Employees who work past normal retirement age should do so because they want to, not because they have to.
From an employee perspective, it can lead to higher satisfaction and better knowledge of their employer benefits, less physical illness due to lower stress, higher productivity at work and, of course, financial security.
A good program would be established as a core employee benefit and is customized based on employee needs and learning styles, taught by experienced CERTIFIED FINANCIAL PLANNER™ professionals and maintain a completely unbiased approach. By assessing employees’ vulnerabilities, strengths and weaknesses through a financial wellness assessment, it provides an employer with the ability to customize the program topics based on employees’ needs through a learning style that resonates best for them (in a variety of different mediums such as online, one-on-one, workshops, webcasts and the like).
There is no one-size-fits-all approach to a wellness program, so tailoring the program to the employees ensures the highest utilization and participation rates, and a greater overall satisfaction with the benefit itself. Maintaining an unbiased approach to the education builds employee trust with the benefit, as he or she initially might be skeptical of “being sold” or concerned that the educator might have a hidden agenda. It ensures pure guidance over advice, while also empowering the employees to make the best educated decisions for themselves based on their unique situations.
Lastly, a good financial wellness program would be comprehensive, integrating all employer benefits and providers, so it’s a seamless and holistic program from an employee perspective.
What advice would you give to employees who are just now being introduced to a financial wellness program?
Become familiarized with the benefit and what it can offer you. Do the educators have their CFP® designation? Are they unbiased and are they there to truly educate vs. provide advice? Do they use it as an ongoing resource throughout your career to help you make financial decisions and maximize your benefits and investment decisions?
Employers that provide this program to their employees as a free benefit truly care about their workforce and their well-being. It can be a truly life-changing opportunity to take ownership of your financial situation, regardless of what life stage you are in.
Any other thoughts?
Employers often include this as a free benefit to employees, so employees should take advantage of it as much as possible provided the program meets the criteria of being a true financial wellness program designed to help them develop the financial habits and behaviors they need to become financially secure.
I’m sure you’ve heard the phrase “start off on the right foot.” It’s a guideline that can be applied to everything in life, from starting a new career to getting married. But a lot of times, we make initial mistakes that lead to others – we’re not only on the wrong foot; we’re wearing the wrong shoes.
You probably see this with employees in their benefits plans: They are using their benefits wrong from the get go. Instead of helping them reach financial milestones, like retirement or to pay for costly health care expenses, benefits end up costing employees more or become lost opportunities.
As workplace financial educators, we often see the mistakes employees make with their benefits after it’s too late. Mistakes are common because employees are either unaware of or misunderstand their benefits. Here are the five most common mistakes we see.
Benefits, in the scheme of everyday life, can help employees not only meet milestones and pay expenses but also build wealth. If you’ve seen mistakes that cost employees, share them with us. As plan providers, you can educate them on common mistakes, so they can maximize their benefits. If you would like a worksheet you can share with your clients and their employees, e-mail us at [email protected].
We’ve all heard that we learn more from our failures than our successes.
But is that really true? Recent research demonstrates the opposite to be true—that there is actually a tremendous amount we can learn from our success. And, further, that leveraging our successes can create major, systemic change and transform cultures within organizations, often in relatively short amounts of time. In their best-selling book, Switch, Chip and Dan Health call these successes “bright spots” and draw upon large scale research studies to show the impact of studying and replicating success.
We’ve seen the same thing from a benefits communication and education perspective: Most employers have experienced major successes in their benefits communication. Maybe not consistently, but if they go back over the last few years they can identify campaigns that really engaged employees, significantly increased participation in benefit programs, and really helped employees better manage their benefits. In some cases, the campaigns may have been so successful they took on a life of their own—becoming viral and even institutionalizing themselves into a culture as an annual event or contest.
When we work with employers, we recommend they examine their best campaigns and initiatives—starting with benefits communication and planning but expanding into overall HR initiatives to determine what the successful programs have in common. In every case where our clients have gone through this exercise, they’ve been able to identify common themes. In some environments, a sense of community is extremely important. Therefore, creating a forum where employees actively participate in the dialogue and interact with each other is vitally important. For others, it’s about target marketing—getting the right groups the right information in the right way at the right time so the communication has a highly personal feel. In other cases, it’s about repetition and making it part of day to day communications and ultimately the culture of an employer group—or even making it part of employee identity. Of course there are always those environments that are all about fun—where employees work incredibly hard and can become burned out and immune to communications because they simply don’t have the energy or enthusiasm to look at one more thing. In these environments, it’s about creating special occasions and events that are fun and allow employees to get their minds completely off work and focused for a moment on themselves and what they need to do to maximize the benefits they have in order to achieve their most important life goals.
At the end of the day, every company is different, but you can almost always find a pattern in your success, and then use these patterns as your roadmap in developing new campaigns that will resonate with your employees. Over time, you’ll end up developing a brand and culture associated with your benefits communications that differentiates your company as an employer of choice and creates a more cohesive (and ideally a more fun) working environment.
What exactly is an unbiased workplace financial wellness program? Companies interested in providing one need to understand the essential components of this new workplace benefit. Behavioral finance expert Dr. Scott Spann explains how using the right success metrics, services, and customization can result in both financially healthier employees and an increase to the companies’ bottom line.
Can you guess which employees are the most financially stressed? Research shows that 55% of lower to middle income mothers have “high” or “overwhelming” levels of financial stress. Thankfully, many of them are turning to their workplace financial wellness programs to help reduce their level of financial stress. Learn more about how these valuable initiatives are helping female employees thrive.
