Financial wellness is increasingly a concern of employers for their employees. “There’s almost universal awareness now that financial problems affect business,” says Mike Sullivan, director of education with Take Charge America, explaining that people do not attend to business as well as they would if they didn’t have financial problems on their mind. “So businesses need to attend to employees’ financial wellness in order to help their own bottom line.”
Although companies have begun paying more attention to this need in just the past few years, Sullivan believes the need arose as a result of the Great Recession. “People were so impacted by the Great Recession, but companies did not become aware until a few years later as to the impact on their bottom line.” Financial wellness is seen as an important part of employee benefits. In fact, in the 2015 “Hot Topics in Retirement” study by Aon Hewitt, recognized as the global leader in human resource solutions, 93 percent of the respondents indicated they plan to initiate or expand their financial wellness programs.
Programs Broad and Narrow
Greg Ward, think tank director for Financial Finesse, sees these programs being offered primarily as part of a total wellness program, which includes physical wellness initiatives. “There’s a well-understood connection between stress — and financial problems are a main cause of stress — and physical wellness,” he says, and notes that less financial stress, more engagement, and helping employees stay on track to achieve retirement goals are the main drivers that HR executives and employers want to address.
“It has become a best practice for an employer to pay for education and make financial wellness available to the entire work force,” Ward says. He makes a distinction between financial education, which has been around for a long time and which focuses on selected topics, and financial wellness. “Financial wellness as an industry incorporated into a wellness program that provides education through a holistic model emerged about five or six years ago.” And he cites a recent study his company did with an employer group of about 50,000 employees that found the employer had saved several million dollars from the population that participated in its program. Savings came from reduction in healthcare costs, increase in health savings account participation, and reduction in absenteeism and wage garnishment.
The holistic approach to financial planning that Ward describes starts with an individual financial wellness assessment. “We need to gauge where the employees are before we can start to offer financial education.” The information is then analyzed to determine key vulnerabilities, such as not paying bills on time or not understanding investment options. Education then addresses needs, such as cash management, debt management, retirement and investing, and can include college savings, insurance and taxes, and estate planning.
Take Charge America’s Sullivan relates some companies take an aggressive approach to their involvement, with one-on-one programs to encourage an employee to deal with an issue and mechanisms — including paying the fees for services — to make assistance available. Honor Health, for instance, “tries to get people specific assistance.” In addition to education, Honor Health helps with individual credit counseling, student loan counseling, housing counseling, “or whatever particular issue the employee may be facing.”
Other companies that Take Charge America works with take a middle approach, stressing education through onsite Lunch & Learn classes on specific topics. These formal presentations are not usually well-attended, Sullivan relates, and adds, “Some companies make company time available; attendance goes way up.”
Sullivan notes, however, that finding the right time to present a class on a given subject is becoming a challenge. “There is an increasing trend of people wanting just-in-time information. For instance, a class on how to avoid collections will draw a lot of people who are on the verge of dealing with collection. And in a class on retirement planning, there will be a lot of grey heads rather than people in their 40s.”
The lowest level of involvement for a company is to offer occasional events such as a Wellness Fair that includes financial wellness.
“Bigger companies are more likely to have large-scale, ongoing efforts,” Sullivan says, noting that an onsite educational session needs a critical mass of people interested in the topic. “It’s more difficult for smaller companies to free up the resources that are appropriate.” Instead of an ongoing program, smaller companies may do what Sullivan calls a “one and done” when they see a problem with debt, for instance, indicated by wage garnishment.
Tailoring to Need
Local insurance and benefits company Lovitt & Touché launched its official emphasis on financial wellness in April last year, with a focus on using Take Charge America services. “We noticed an increase in questions to HR on different financial stresses throughout 2013,” says Human Resources director Shawn Ellis. “The management team decided if this was top of mind to them, we wanted to bring them programs that were relevant.”
Targeting all employees and taking into account their different walks of life, according to Ellis, the financial wellness program started with helping people understand how they view money and learning about budgeting, to establish a game plan. Additional education covered types of debt and debt options, and the program then made available one-on-one consultations.
“The feedback has been very positive,” Ellis says, sharing that some employees had initially been concerned about how they might be judged if they attended any of the education programs.
After testing the waters as to what would be of interest to include in the program, Ellis says Lovitt & Touché realized no one tool was right for all employees and decided to offer a variety of tools. This year’s program added a Social Security planning seminar, the MetLife Retirement program and a presentation by noted financial advisor Dave Ramsey.
The Right Representative
Experts have long been available to speak to employee and other groups on specific topics, and businesses can take advantage of no-cost opportunities to provide information to their employees. However, Sullivan notes that 401(k) and investment companies, and insurance companies, are often anxious to talk to employees about financial matters as an opportunity to get them to sign up for services. In such cases, he observes, the advice is likely to be skewed. “Companies need to be aware of who is presenting,” he says.
Motive may need to be balanced against expertise. “It’s important to get the correct speaker for the topic,” says Sullivan. So, too, with financial education services companies. Sharing that Take Charge America is more for people who have financial challenges whereas individuals with a lot of money might need to work with an investment company, Sullivan notes companies have different skills they can offer employers developing a financial wellness program.
Financial Wellness by Generation
Millennials appear to have the most psychological “baggage” from the Great Recession. From the way they manage their money to how they invest, their focus is strongly on immediate issues rather than building wealth for the long term. This group has the lowest 401(k) participation rate of all generations at 83 percent in 2014, despite having more exposure to auto-enrollment than previous generations.
Gen X’ers are in the most danger and the least likely to achieve financial security. Faced with competing priorities, Gen X’ers may be putting their children first at the expense of their own financial security. Only 17 percent are on track to retire comfortably, yet 23 percent are contributing to a 529 college savings plan.
Baby Boomers are, overall, the most financially secure but face an impending healthcare crisis due to longevity and inadequate insurance planning. Only 16 percent of boomers report having long-term care insurance, despite estimates from the U.S. Department of Health and Human Services that 70 percent will require some level of care in retirement.