Data & Research February 27, 2017

Employees Need More Help Feeling Financially Well

A study suggests progress on a variety of personal financial goals appears to have taken a negative turn in the past two years, including saving enough for retirement.
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Concerns about financial security have the greatest impact on employees’ feelings of overall well-being, according to findings from the Fourth Annual Guardian Workplace Benefits Study.

As part of the study, Guardian created the Workforce Well-Being Index (WWBI), which measures consumer attitudes about their financial, physical, and emotional wellness. Workers feel less positive about their financial wellness (3.19 self-evaluation rating out of 5) than they do about their physical (3.26) or emotional wellness (3.45). The WWBI identified financial wellness as the most significant driver of working Americans’ overall well-being, constituting 40% of the average index score.

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The study suggests progress on a variety of personal financial goals appears to have taken a negative turn in the past two years. In 2014, 81% of respondents indicated they were saving enough for retirement, compared to 65% in 2016. Eighty-seven percent reported in 2014 that they were paying off or reducing household debt versus 79% in 2016. And, in 2014, 78% said they were saving for children’s college education, while only 57% said so in 2016.

In addition, the study found one in five (21%) working Americans have no retirement plan—and Millennials and single parents are even less likely to be saving for retirement. Just 41% of workers feel they are making good progress toward their retirement goals—down from 60% in 2014. Only 22% say they have access to college savings or tuition benefits through their place of work.

According to the study, Generation X (ages 35 to 54) and single parents are feeling particularly strapped. They have some of the lowest well-being scores, driven mainly by personal financial concerns, including paying bills, reducing debt, and absorbing higher out-of-pocket costs for medical care. 

Gen X and single parents share other similar financial concerns:

  • They are having more difficulty making ends meet—three in five feel they are keeping up with basic bills and expenses;
  • Only half feel they are successfully managing their debt;
  • One in four feel on track saving for their children’s college education; and
  • Few feel they are saving enough to live comfortably in retirement.

Employers increasingly are seeking ways to improve workforce health and productivity, which often begins with a strong financial foundation. “Taking a more holistic approach to managing workforce well-being—one that addresses not only physical and emotional health but also employee financial security—will produce better results for employers looking to reduce medical benefits costs, improve absenteeism/presenteeism, and increase employee productivity and engagement,” Guardian says.

The report of survey results, “Mind, Body, and Wallet,” may be downloaded from here.
In Practice February 27, 2017

Adviser Independence Trends Impacted By Fiduciary Uncertainty

“Regulatory pressure increases the appeal of independence and the need to shift the active versus passive conversation,” according to a new report from Cerulli Associates. 
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The February 2017 issue of The Cerulli Edge – U.S. Monthly Product Trends Edition finds about half of U.S.-based financial advisers view the registered investment adviser (RIA) business model as a sensible solution to increased regulatory pressure.

Even as the Trump administration makes broad pledges to roll back financial regulations, including both Dodd-Frank and the Department of Labor (DOL) fiduciary rule, advisers are feeling anything but certain about what the future may hold. Beyond the quickly shifting picture in Washington is the constant pressure of participation-driven litigation and the threat posed by emerging advisory technologies that, at least according to some, threaten the traditional approach to one-on-one advice, whether fee- or commission-based.  

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According to Cerulli’s research, nearly two-thirds (64%) of broker/dealer affiliated advisers “plan to shift more of their business toward fee-based advisory models in an attempt to be better positioned to comply with the conflict of interest rule, if it is implemented.”

Cerulli posits that, “as advisers become increasingly comfortable operating in a fee-based environment and embrace fiduciary duty,” they may be more likely to consider moving away from commissions-based business models associated with the B/D channel, in favor of the RIA approach. By the agency’s own admission, the DOL fiduciary rule was designed to push advisers forcefully in this direction. This is why close to half (47%) of all advisers “believe that the RIA business model will become more appealing post-DOL conflict of interest rule.”

As adviser business models shift there is also an ongoing reassessment of investment approaches. Cerulli finds “mutual funds” as a broad asset category “witnessed their first positive month of flows ($19.3 billion) since May 2016.”

“Assets for the vehicle grew 1.6% to $12.7 billion in January,” Cerulli reports. “ETFs gathered flows of $40.3 billion in January, building upon a very successful 2016. January flows combined with positive capital market performance led to ETF asset growth of 3.5%, ending the month above $2.6 trillion.”

The report concludes that “cost is a key investment consideration, particularly when focusing on long-term outcomes, but advisers and investors must incorporate other elements into their thinking.”

More information about obtaining Cerulli Associates research is available here. 

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