Financial Wellness Programs Offer Many Benefits to Employers

Employees of all income levels face distracting financial stress, survey finds.

Companies stand to benefit in numerous ways by offering a financial wellness program, according to a new study released by Morgan Stanley and conducted by the Financial Health Network. Financial wellness programs reduce employee stress, improve retention and engagement and help a company stand out in the marketplace.

A survey of 1,000 full-time employees at midsize to large companies found that many struggle financially, and this financial stress negatively affects their productivity at work. Among those experiencing financial stress, 78% say it distracts them while at work.

Asked what caused their stress, respondents said their No. 1 answer was finances (54%), followed by their work situation (51%), health issues (45%) and family issues (44%).

Thirty-seven percent of employees said they have more debt than they can manage, and 41% reported having too little saved to cover three months of living expenses. Even among high-income employee—those with a household income over $100,000—52% said debt causes them stress, followed by 55% citing unexpected expenses as the cause and 43%, inadequate savings.

Seventy-four percent of employees said a financial wellness program is an important benefit, and 60% said they would be more inclined to stay at a company that offered a program that helped them better manage their finances.

Among employees whose company offers them financial wellness benefits that help them save for emergencies, provides them with student loan repayment tools or gives them financial coaching, between 40% and 60% said they have used the service in the past three years.

However, 42% of employees said they feel inadequately informed about the benefits and programs their employer offers. Of employees who do not use all of those benefits, many said if those were explained more clearly and easier to access, they would be more apt to use them.

Asked how they want to learn about their benefits, 66% said through online calculators, 62% through live meetings with a financial adviser, 55% through in-person seminars, 43% through live webinars, 31% through chat rooms, and 31% through social media platforms.

“Providing financial wellness resources and education to employees has tremendous benefits,” says Brian McDonald, head of Morgan Stanley at Work. “Finances are one of the greatest sources of stress for employees, and those concerns affect their productivity. Firms that invest in financial wellness resources for employees will clearly set themselves apart in the marketplace.”

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Advisers Increasingly Using Model Portfolios

They see them as a way to offload day-to-day asset management oversight so they can strengthen customer relationships. 

Advisers are increasingly turning to model portfolios, according to a new report from Broadridge, “Distribution in a Model-Driven Age.” Home offices like them because they permit them to have greater control over investment processes, helping to boost performance and improve asset retention. This gives investors superior investment management at a comparatively low cost, and for advisers, offloading investment management responsibility frees them up to strengthen customer relationships and grow their business.

Today, there is $1 trillion in model portfolios and more than 10,000 different models in the market. Between 2016 and 2018, the compound annual growth rate of retail portfolios was 21%, but the growth rate of model portfolios was 37%.

Most financial advisers, 70%, rely on a combination of model and custom portfolios. Only 15% rely exclusively on model portfolios, and only 15% do the same with custom portfolios.

More than half, 54%, of advised assets are in model portfolios. Advisers say model portfolios are efficient for business growth for the following reasons. Ninety-one percent say they give them more time for client-facing activities. Eighty-three percent say they give them more time for financial planning, and 78% say clients care more about planning service and support than they do about outperforming the market.

The top five reasons advisers say they use model portfolios are: business scalability, the ability to leverage investment management expertise, the ability to focus on client acquisition and retention, being in a better position to address compliance and regulations, and having more stringent manager due diligence.

Broadridge’s report notes, “It’s not easy for advisers to balance business development with portfolio management. Rather than analyzing every position, a growing number of advisers rely on models to manage assets, so they can focus on client building and retention strategies.”

Ninety-three percent of advisers who use model portfolios are happy with this decision, and 91% say they give them more client-facing time. Advisers view models as the preferred method for clients with lower assets under management (AUM), with 73% saying they are the right approach for those with less than $500,000, 46% saying this is the case for clients with $500,000 to $999,000 in assets, and 31% saying this is the case for clients with $1 million or more. Broadridge says asset managers could change this trend by creating more sophisticated models that could attract higher-end investors.

However, advisers do have some concerns with model portfolios. Fifty-one percent say they make it harder to differentiate themselves from self-serve and robo-advisory options. Forty-six percent say they do not work well in down or volatile markets, 45% say it is harder to assess risk with models versus custom portfolios, and 35% think their clients might think them lazy for using model portfolios.

When building model portfolios in-house, 74% of advisers turn to asset managers, followed by Morningstar (65%), in-house proprietary tools (55%), BlackRock Aladdin (26%), Riskalyze (15%), Zephyr (15%), Internal CIO (13%), Dorsey Wright (13%), Zacks (6%) and Envestnet (6%).

Asked what the top five most useful resources asset managers supply them, advisers said websites, internal/external wholesalers, investment guidance from portfolio specialists, email correspondence and white papers.

Broadridge’s findings are based on a survey of 500 advisers conducted in March and April.

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