Overcoming roadblocks to transformational financial wellness programs

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Financial wellness is all the rage, but leading industry observers caution producers to steer clear of the pitfalls.

The trouble with programs that focus on education and financial literacy is they fail to inspire or produce positive behavioral change, explains Carla Dearing, CEO of the SUM180 online financial planning service. She says “truly transformative” efforts share four key ingredients. They include adopting a comprehensive, personalized, private and arm’s length approach.

Between increased oversight of fiduciary responsibilities and growing demand for transparency, as well as employee debt and savings challenges, financial wellness programs are swimming upstream. And experts agree there’s plenty of room for improvement.

“Benefit brokers generally make underwhelming efforts when helping plan sponsors maximize the potential for their benefit programs to impact employee behavior and rank-and-file workers improve their financial wellness,” opines Tony Verheyen, executive director for the Plan Sponsor Council of America.

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Their collective challenge is to overcome a lack of direction and quantifiable ROI, as well as confusion and apathy, he says. One suggestion is to incorporate Gallup’s research on holistic wellbeing and identification of financial wellness as an essential component to overall wellness. Another is to integrate health savings accounts into a larger discussion about budgeting for daily and annual expenses, debt and credit management and retirement planning.

“At a time when broker compensation is being compressed, the imaginative broker will thrive by becoming a solid contributor to the effective development of workplace financial wellness programs,” Verheyen observes.

What’s important is to uncover “the burning issue” that resonates with plan participants, explains Neil Lloyd, head of U.S. defined contribution and financial wellness research at Mercer. With younger workforces, for example, he says that could be budgeting or student loans. Programs also need to help participants develop the financial confidence or courage to make better choices, according to Lloyd.

A holistic view

Piecemeal solutions that only involve 401(k) plans or student loan repayment programs must be replaced by a holistic view that’s not intimidating, Dearing suggests. Also, scrubbing programs of any lecturing tone will enable employees to address their financial issues without fear of judgment or self-consciousness, she notes. Still, there are caveats to consider. “Don’t make it so comprehensive that the person has to spend 15 to 20 minutes filling out a whole lot of forms,” Lloyd warns. “They’re never going to do any of it.”

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The thinking behind customized recommendations is that they will go a long way toward helping engage participants. “We’ve got to find better ways to get at the heart of the issue and give relevant, right sized advice,” Dearing insists.

Privacy is also paramount. That’s because “money is a highly sensitive, emotionally charged subject that is hard to discuss even with our closest friends and family, much less in an employer-sponsored group setting,” according to Dearing.

“No one wants their HR manager to know they’re deeply in debt,” adds Liz Davidson, founder and CEO of Financial Finesse. Within this context, establishing a sense of trust can help employees overcome any anxiety. “If people trust their employers to give them a good program and not to look at all their personal details, that can be a very positive experience,” Lloyd says.

Given the need for an arm’s length commitment to securing private information in this intensely scrutinized fiduciary climate, Dearing suggests that participant details be confined to third-party servers and only aggregated data be reported.

It’s critical that employee education and communication be developed and delivered by unbiased certified financial planners who aren’t trying to sell anything, Davidson notes. In addition, she says financial wellness should be made available to all employees, regardless of age, income, gender, location, the type of work they do, etc.

Having insightful metrics also will enable plan sponsors and their advisers measure the results of their financial wellness programs in a more meaningful way from beginning to end, Lloyd notes. “If people aren’t engaging, you don’t waste six months to change it,” he says.

It all comes down to behavioral modification, Dearing believes, adding: “If you really get into the issue of how to help employees with their finances, it is way more like Weight Watchers than it is 401(k) education.”

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Financial wellness Financial stress Financial planning Advisor strategies Fiduciary standard 401(k) Retirement education Retirement readiness Retirement benefits Retirement planning