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Building a Financial Wellness Plan That Works

Building a Financial Wellness Plan That Works

Executive Summary

Since 2016, the concept of a financial wellness plan has seen broad and rapid acceptance by employers.   This has accelerated since the pandemic hit, and it has become even more critical to ensure employees have the education and resources they need to make good decisions for their financial future.

It’s also important to ensure that the program really works for employees – by putting thought, resources, and measurement behind it.  While it can be a great recruiting tool, if its designed just to “check the box” with the minimum of thought or resources, neither the employees nor the employee will get the maximum benefit out of it.

One way to think about it is that it isn’t tied to a point in time or to any investment vehicle. Instead, it’s a comprehensive view that ensures an employee has confidence and security at every point in their employment and financial journey- the short-term, mid-term and long-term.

The full picture is that a good plan creates less stressed, more productive, happier employees – which of course, generates a better financial picture for a company in terms of retention, recruiting, and revenue.

 The Retirement Plan is Just the Starting Point

From a practical perspective, the long-term approach is important for employees to be able to retire with dignity. And have good memories of the place where they worked and frankly, for them to be able to retire on time, when the company's ready for them to retire and the employee is ready to retire, and they get to that magical point in time, the short-term and the mid-term mean even more.

 The Umbrella of Financial Wellness

A comprehensive financial wellness plan begins by thinking about whether employees have a foundation to get through the ups and downs in the short-term and the mid-term. That’s what we mean by an umbrella – it should help shelter them across their entire financial picture. We think about, for example, how many employees have emergency savings accounts in place? And is that three to six months? Is it one to two weeks? What does that really look like? 

 Managing Debt 

We want to better understand whether employees are taking positive steps to managing their debt and whether they're paying off the right type of debt at a faster rate maybe, than the other debt that might be at a lower interest rate, for example. 

Saving for College

We want to make sure that they're starting to understand what college savings needs might be for their children. If you’ve been involved in planning for your children's college education or you're in the middle of it right now, you know those expenses have grown really astronomically, outpacing the cost of inflation and the cost of other goods and services. Ensuring that employees know what resources they have to help them meet these costs is a big part of relieving stress – and that’s the goal of financial wellness. 

 Data Drives Results

Setting up programs that help people begin to get their savings on track and reduce their debt is a great starting point, but there is limited value in just looking at it at one point in time.  If we don't measure it again in a year, and then every year after that, it’s not going to result in maximum benefits. The big picture way to guarantee the success of a program is to identify five, six, seven, eight aspects of somebody's overall financial picture. And then be willing to survey and poll employees and look at that data and actually manage and measure it to see if you’re improving as time goes on.

 The Productivity Impact is Real and Growing

Being connected with every aspect of our lives through our cell phones means that employees now have a place to go and act on that anxiety that we're feeling. The amount of time that people actually spend actively away from work, beyond merely being distracted, it starts to really take away from their productivity. And you've got a lot of financially stressed employees who are spending three, four, five, six hours a week working on that while they work. Which might not seem like a lot, but if you looked at in the aggregate across your employees, you’re talking about being 10- 15% less productive.  And that’s a real hit to your bottom line. 

 COVID-19 Has Intensified the Problem 

How do you deliver financial wellness in a COVID world?  That was a tough question even prior to the pandemic, when we had that normal work set up, where a lot of people were working in the same place or at least you had multiple offices, but almost everybody was going into an office almost every day.

We've got to figure out a way to combine technology and in person meetings to still provide people, person to person service when it comes to their financial wellness. Money is incredibly personal. It makes sense that even as we as a society become more dependent upon technology to gather information and to be connected in some way with other people, people still want to deal with people when it comes to their money.

As we move forward, it’s important to look very specifically at every company individually. We think about it as four key questions: 

  1. How has your workforce changed the way that it's working or where it's working from where it was six to 12 months ago? 
  2. Is that permanent? Is that going to remain the case as we come out of this or we establish some new sense of normal? 
  3. How many employees can we get to in person versus how many will we have to reach remotely? 
  4. How do you put a plan in place where you’re actually trying to connect with people? 

And again, it comes down to using the data. If they are not looking at attendance rates and following up with that, employers are not going to see the value of their wellness plans. And this means reaching out vendors and service providers and asking for the metrics that prove they are actually engaging their constituents. That will be the ultimate test or the ultimate standard as we move forward.

Employer/Employee Interests Are Aligned

Across every metric, both employers and employees are signaling that financial wellness programs are important to them. In terms of recruitment and retention, employees have this on their radar as core employee benefit offering – which means employers do too.  To understand the impact, we think it from two different perspectives: The cost of not doing well, and then the benefit of doing it well. 

From the cost perspective, we've got significant data showing us, first of all, that financial stress is the number one form of stress that Americans feel. We also know then that when they're stressed, they're distracted, they're less productive. They don't come to work as often. They're less efficient when they're there. They don't stay with companies nearly as long. They don't develop that loyalty and they don't really start to view the company as a part of who they are.

From the benefit side, let's think about employers that have said, "We're going to invest in an employee financial wellness program. We're going to bring this much desired employee benefit program to them. We're going to devote our company to making sure that we do it, we do it well. We manage the data because we see there's going to be a tremendous return on investment.” What happens is a cumulative effect, because when happy people are around others, they can have that contagious effect of making other workers feel better about what they do. And think about how that rolls all the way up or all the way down to the bottom line for a company. Companies make more money if their employees are happier, healthier, more productive, and they stay around longer.

 The End Result: Mutual Benefit

So at the end of the day, whether you're somebody who looks at things from saying, "I just want to make my other employees happy." Or we're saying, "Hey, I want to make sure that our bottom line is as healthy as it can be." I don't care, those don't have to be mutually exclusive. The future of financial wellness is companies saying we're going to do it because we all benefit when we do it.

Learn more by joining us for our upcoming webinar, "401(k) Plans in a Covid-19 World" on September 10th, from 2 to 3 PM, by registering here: https://register.gotowebinar.com/register/1181021032220012814