Financial wellness…What exactly is it and what’s all the buzz about anyway? For starters, here’s a quick overview, along with three reasons why plan level advisors really should start taking financial wellness seriously.
Financial wellness is the state of personal knowledge and access to resources to plan for and help manage fundamental financial events, which everyone is likely to face – budgeting, saving, transacting, borrowing, protecting, and investing. The typical talking points about financial wellness revolve around how financial instability affects employees and employers – lost productivity, increased work comp, medical and disability claims, theft, turnover, etc. Important stuff?! Advisors SHOULD care, but so far it doesn’t seem like advisors are fully on board. Maybe it’s simply due to the fact that nobody’s honestly discussed how it affects your piece of the pie.
- You’re losing money right now! Financially insecure employees are more likely to opt out, stop contributions, and take loans and hardship withdrawals. A study by HelloWallet reported that, of the $294 billion contributed to 401(k) plans by employers and employees in 2012–2013, 24 percent (about $70 billion) was withdrawn for non-retirement purposes. That equates to 1 in 4 Americans that tap their savings before they reach retirement age. Employers with financially insecure employees experience much larger burdens in risk management, healthcare costs and HR management. And, financial wellness products and services are getting a slice of the employer/employee budget, which then ends up reducing 401k contributions. Fixing employee/employer financial wellness issues will shore up income from your plan.
- Financial wellness is an opportunity to diversify and expand the income of your practice. Studies about workforce financial instability and how this affects employer costs are alarming. According to a 2015 PricewaterhouseCoopers survey on Employee Financial Wellness, 1 in 5 American workers say they experience distractions at their jobs due to personal financial issues. And 37% say they spend three hours or more at work thinking or dealing with personal financial issues. Financial wellness is a new frontier and employers are paying for help! Technology (private exchange, HRIS, and digital benefits) is offering a flourishing landscape of solutions to better offer help and financial services. It is now easy to offer digital “do-it-for-you” solutions to employees to help address financial instability/insecurity through access to financial education, banking, savings, student loan repayment assistance, credit, AND investment help. With increasing pressure on advisor fees, doesn’t it make sense to diversify and expand into services that offer more value to participants?
- Competition is coming to eat your lunch! The health/welfare consultants and other technology solution providers are actively engaged in addressing financial wellness issues for employers. They’re getting savvy about ERISA, DOL and technology because of ACA, explosion of HSA growth and compliance demands. Once these other consultants have crossed the fin-well line of scrimmage, it won’t be a leap for them to then take a bite out of the 401k consulting business. Can’t you just imagine the phrase: “Now that we’ve taken care of your employee financial wellness problems, why don’t we take a look at your 401k and see what we can do there?”
Get ahead of the curve and keep the competition out of your business by filling the financial wellness void before someone else does! It’s only a matter of time.