Smaller employers tackle financial wellness

Register now

Financial wellness has finally hit it small.

Over the past several years, a growing number of employers have turned to financial wellness programs as a way to not only help their employees’ day-to-day money worries, but also to help them get on the road to a healthy retirement.

These programs were initially adopted mostly by big employers. Now some medium and smaller companies are finally starting to embrace them too.

Those smaller players weren’t “willing to invest too much in financial wellness because they weren’t seeing it as an important benefit necessarily, and they are more budget and time constrained,” says Liz Davidson, CEO and founder of Financial Finesse, a company that has provided financial wellness programs for more than 20 years.

No more. Growing increasingly worried about their workers’ retirement prospects — and seeing them struggle with their finances — smaller companies are finally embracing financial wellness programs.

“[They’re realizing] it’s the right thing to do,” Davidson says. “They are feeling a little more that it’s the way the world is moving, and it’s something they should offer as part of their overall benefit and well-being strategy and there are now ways to deploy it in a highly scalable way.”

Indeed, industry insiders predict it’s a trend that will continue as these programs become more cost-effective and efficient.

According to Prudential research, the percentage of employers offering financial wellness programs has risen sharply in just the past few years. It now stands at 83%, up from 20% in 2015.

Employers are not only looking at adding these programs, but making them appealing enough that their employees actually use them.

To help facilitate this, they’re making sure they understand what their employees’ financial problems are and embracing human coaching and other technological advances to help drive adoption rates.

Helping with day-to-day stress

One important lesson that smaller companies are realizing is the connection between stress levels and retirement. That is, getting people to a reach a secure retirement requires getting a handle on the financial challenges workers face daily.

Instead of making financial wellness and retirement readiness a stand-alone program, many companies are packaging this information around employee life events, such as having a child or buying a house.

These programs are offered in addition to hosting a workplace-sponsored retirement plan, a health savings account and other voluntary types of coverage like life insurance and disability insurance.

Employers are determining what employees are looking for in their benefits, what they are worried about and what their goals are, then finding ways the company’s benefits programs can support their employees’ financial security.

“We’re seeing a trend toward CEOs embracing this, saying, ‘This is who we want to be as a company and what we stand for,’” she says. “It’s an extension of their brand in some cases.”

Ascensus is one of a growing number of medium-sized companies that has added a financial wellness program in an effort to help its employees prepare for retirement.

The Dresher, Pennsylvania-based independent record keeper and third-party administrator actually manages retirement plans for companies of all sizes but realized it needed to focus on helping its own employees prepare for their post-work life.

So it rolled out a financial wellness program to its 2,400 employees in September.

Rick Irace, chief operating officer at Ascensus, has been in the retirement industry for 33 years. In that time, he says, employers went from not wanting to talk about retirement readiness to “employers embracing and really wanting to take part in discussing this with their associates,” he says.

Ascensus, like many of the company’s retirement plan clients, realizes that getting employees financially fit helps the company’s bottom line. Helping workers solve their financial problems and save more for their futures helps them to be more present and focused at work.

“The research is showing us that Americans are anxious about their finances,” Irace says. “We also know people can outlive and are outliving their money. Nearly half of employees say they are stressed out by their financial situation. We know that over 77% say they spend three hours or more at work thinking about it or dealing with financial issues.”

Many workers are overwhelmed by credit card debt, having to care for elderly parents or having to pay off student loans.

“They just don’t know what to deal with first,” Irace says.

Ascensus partnered with Financial Finesse because it likes to partner with firms that share its core values, Irace says. He also likes Financial Finesse’s unbiased approach to retirement readiness and financial wellness.

Their coaches are all certified financial planners and they don’t hold securities licenses or try to sell their clients on alternative products.

“The proof is in the pudding: the results. They demonstrated that when employees take action, they take action within 30 days of using the service,” he says. That means making a behavioral change like reducing their credit card debt or setting up a cash reserve. When employees get a handle on their personal finances they are less likely to take money out of their retirement accounts to solve daily money crises. Ascensus says it’s gotten “great feedback” on the program from its own employees.

Focusing on young employees

Meghan Murphy, vice president of thought leadership at Fidelity Investments, says that many of Fidelity’s clients are focused on getting the youngest members of their workforce into the company retirement plan to save at a solid rate and use the company matching contribution.

Over the past several years, Fidelity has noticed a big improvement in the retirement readiness efforts of younger employees.

“We have nearly a quarter of millennials who are saving 15% or more for retirement. That includes the contributions employers are making. That’s a big shift from a decade ago,” Murphy says. “We are seeing it really starting to sink in for younger employees.”

For Generation X, employers aren’t just talking about retirement anymore. They are talking about a broad spectrum of financial health because this generation, in particular, has many competing financial priorities. They are paying off mortgages, paying off student loans and credit card debt and worrying about how to put their own children through college.

For the baby boomers, employers are focused on getting pre-retirees to a spot where they are comfortable and feel prepared for retirement. This doesn’t happen in the few years before someone retires. Companies are now looking at employees in the 50 to 55 age range and talking to them about Medicare and the best ways to claim Social Security.

That includes discussions about how people want to transition from a work environment to a retired life, both financially and in the lifestyle they want.

Retirement is a huge mind shift for most people, and many don’t have a plan for what they want to do next.

They also have been so focused on saving money for their future that they don’t know how to start tapping into their nest eggs, she says.

Many companies are encouraging employees to make a slow transition to retirement.

They can start scaling back the number of hours they work each week so that they are slowly able to engage themselves in life outside of work by building up a different routine.

This is so they “don’t wake up the day after retirement and say, ‘What am I supposed to do with myself?’ They are thinking through what their transition plan looks like and engaging their pre-retiree population in volunteer opportunities so they have those connections come retirement,” Murphy says.

For companies, such offerings as student debt refinancing, mortgage refinancing and encouraging emergency savings accounts are signs of the anxiety many employees still have over retirement.

All of these things can help build an employee’s financial confidence. Even small financial decisions can have a big impact on retirement readiness, she adds. Workers in lower income brackets can still take the time to build up an emergency fund so that they don’t have to tap into their retirement savings when they have an emergency, like a leaky roof or a flat tire.

“Sometimes boosting people’s confidence is the best thing you can do to make them make better financial decisions,” she says.

For reprint and licensing requests for this article, click here.
Financial wellness Financial literacy Financial planning Financial stress Retirement planning Retirement readiness Retirement income Employee engagement Employee communications