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Financial Wellness Is An Essential Benefit

Summary:
A quarterly update from CEO Thomas E. Seitz on some of the most relevant financial storylines, potential changes that may impact you, and an update on ABG news.

  • Post date January 11, 2022

Financial Wellness Is An Essential Benefit

There is a strong connection between mental health and finances. Financial problems can lead to feeling anxious and/or depressed and, in turn, may reduce an employee’s productivity. Financial stress is a major cause of stress-related illnesses and 84% of employees report having some degree of financial stress[1]. Those who are financially worried are more likely to react emotionally and possibly engage in poor financial behaviors, such as, withdrawing money from retirement accounts or overextending themselves with high interest debt.

In this post-pandemic environment, employers are starting to pay more attention to financial wellness and, as a result, more programs are being offered. A report conducted by the Bank of America found that 46% of employers said they are offering financial wellness programs, compared to 40% in 2020[2]. Financial wellness programs have transitioned from being a nice perk to an essential benefit. Offering a robust wellness program also helps employers stand out so they can attract and retain talent.

A pioneer of worksite financial wellness, Brad Arends, co-founder and CEO of Intellicents, a national independent financial services firm centered on the employee benefit relationship, offers an interesting perspective on what makes a financial wellness program effective. The problem with many of the current programs, he points out, is that these programs need to go beyond education and provide advice to employees. Having a digital presence is important but also having that high touch one-on-one support from advisors who are Certified Financial Planners (CFP®) is what makes a financial wellness program successful.

“The industry is doing a good job promoting financial wellness but isn’t doing a great job actually helping employees improve their financial lives. The plans centered on education are failing. Employees need more than a beautiful website to get engaged in the process. It needs to be a combination of great people and tech,” he says.

Financial Wellness Is Desperately Needed

Mr. Arends notes that the pandemic exposed the poor financial health of the American worker. He believes financial literacy is lacking, should have been introduced in school and now often falls on employers to provide this education. It also affects all individuals regardless of income level. Even those who are highly educated can be just as uninformed when it comes to financial issues.

Take it One Step At A Time

Many of the programs that are currently offered provide only education which can be overwhelming for employees and are therefore not engaging. There needs to be a clear action plan in place, making it easy for employees to address one financial topic at a time. Mr. Arends recommends that financial wellness programs go beyond education and offer advice that actually helps employees. Advisors need to be able to effectively communicate to participants so they can assist them on a level they will understand.

As an example, Intellicents offers a comprehensive multi-channel financial wellness program that is centered on providing every employee a functional financial plan called Life Steps. Through the program, an employee will get advice on five key components:

  1. Debt Management – Incorporates an employee’s maximum debt load and how to effectively manage debt.
  2. Budgeting – Helps employees stay on track and pay attention to their spending.
  3. Emergency Savings – Provides a range of what employees will need which is typically 3 to 6 months’ worth of expenses.
  4. Protection of an Unforeseen Death – Determines how much life insurance is needed in case of an unforeseen early death.
  5. Retirement– Gives employees an idea of how much they should have in their 401(k) plan today to be on track when they get to retirement.

These five topics are spread out over a 5-month period so that an employee can tackle one topic at time allowing them the opportunity to get on the right financial path.

The Future Of Financial Wellness

There needs to be a combination of high touch in the form of on-site group and one-one-one meetings with experienced credentialed advisors as well as user-friendly technology that enables employees to aggregate their information without having to go to multiple websites. Mr. Arends notes that it’s difficult for advisors to expect employees to work on tomorrow’s money (the retirement plan) when today’s money is not in good order.

Financial wellness that provides holistic financial planning in addition to education is the future. “It’s a convergence of retirement, health and wealth that’s taking place in the employee benefits world”, says Mr. Arends. Worksite financial wellness programs need to offer personalization and easy actionable steps to have employees truly engaged throughout the process. A successful program offers significant benefits for both the employee and the employer.

We Are Here To Help

If you are looking to develop a financial wellness program for participants or have questions about one, ABG can help. Contact your local ABG representative for more information.

[1] https://www.intellicents.com/financial-wellness

[2] https://www.cnbc.com/2021/10/18/great-resignation-may-lead-employers-to-offer-financial-wellness-perks.html

Sincerely,

Thomas E. Seitz
CEO
Pension Corporation of America
Member of the Alliance Benefit Group, LLC.