Moving from the idea of financial wellness into a plan of action
Financial wellness is a hot topic but employers and plan sponsors need do more than have a conversation. They have to realize that a worker with serious financial problems is not as productive as they should be and may not retire on time. Plus, moving from just talking about employees’ financial worries and creating a plan of action can be a hurdle for many plan sponsors who feel a responsibility to educate plan participants.
Data shows that it’s worth the effort to help for employees in critical need of assistance. Nearly half of employees (46%) spend three hours or more on personal finances at work, and this creates a distraction in the workplace, according to PricewaterhouseCoopers research. Additionally, employees are nearly twice as likely to miss work due to personal financial issues.
Not only are financial concerns affecting work performance, but employees also are calling out for help. Nearly 83% report they have a lack of savings, 71% do not have enough money to cover regular expenses, and 69% do not have enough money for retirement, according to The Pew Charitable Trusts.
One of the hurdles plan sponsors face when moving forward with financial wellness is the difficulty of proper benchmarking. On the health side of wellness, benchmarking is fairly straightforward — I walked 10,000 steps, I lost 22 pounds, I dropped my cholesterol levels. On the financial side of wellness, however, benchmarking is often not so clean. Without the ability to find a return or to gauge success, it can be difficult to gain management support and to earmark funds and resources to roll out a comprehensive financial wellness program.
That said, there is a growing understanding of the impact of financial illiteracy.
Proper financial education can reduce the number of employees deferring retirement because they are not adequately prepared to leave the workforce. Why should this concern plan sponsors? For every employee who cannot retire “on time,” the cost to the employer is at least $50,000 per year, according to Prudential Financial.
Additionally, E. Thomas Garman, founder of the Personal Finance Employee Education Fund, has compiled data for many years that suggest an effective financial wellness program can return $2.80 per every $1 invested.
And with this understanding, a new trend is emerging. A 2016 study conducted by AON Hewitt asked plan sponsors why they would offer financial wellness programs in the future. The top answer, with 85% checking off this box, was because it was “the right thing to do.”
Plan sponsors who do not get on board now will soon fall behind industry norms. The number of plan sponsors using a financial wellness program should increase from 17 to 51% in the next five years, according to a July 2017 Hartford study. This means that more than half of employers will be offering some type of financial wellness program to their employees.
The bottom line is employees are demanding more help. What hurdles could possibly be left to solving this problem?
I have spoken with hundreds of plan sponsors and consultants, I often hear that the topic of financial wellness is simply too big. There is not enough clarity about what it is and the playing field of financial wellness offerings is growing exponentially. This gives way to an enormous amount of confusion and makes it difficult for the plan sponsors to get started and execute. And the last thing employees need when trying to make sense of their personal and family finances is more confusion.