Client Service May 11, 2020

Financial Wellness in the Age of Pandemics

Pandemics are not only a public health crisis, but also a crisis of employee confidence. Tech-savvy advisers and employers can help.
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COVID-19 has demonstrated that pandemics are not only a public health crisis, but also a crisis of confidence among employees about their financial future.

Unlike previous financial shocks, however, companies have an opportunity to lower the level of their employees’ anxiety by offering tech-powered financial wellness programs that also provide advice from human financial advisers who have been through economic turmoil before. 

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Organizations offering this kind of holistic financial wellness as an employee benefit can help their workers address their investment, budget, personal spending, risk management and estate planning issues that have all surfaced since the COVID-19 outbreak. 

Comprehensive financial wellness can help reduce financial stress, the top concern of employees in the workplace, according to a study from PwC. And, perhaps just as important, financial wellness in a time of great need sends a strong message about a company and its leadership team’s commitment to corporate responsibility.

A New Model

New financial wellness models powered by technology are quite different from previous ones, which were largely one-dimensional financial literacy offerings or calculators.  

Financial wellness in this context means fiduciary advice is provided in two complementary ways. The first is a digital platform powered by artificial intelligence (AI) and cognitive computing that gets progressively smarter and more effective in advancing financial wellness. The second is access to seasoned financial advisers who can provide guidance to employees through various life events and offer wisdom in times of panic.

In essence, it’s the best of both worlds in terms of financial planning and wealth management. 

The digital platform helps employees create a customized, goals-based financial plan that factors in every aspect of personal financial management. The digital adviser considers many financial variables that are part of an individual’s life and moments that matter. It then produces a personalized action plan for saving, investing, spending, debt management and risk management.

As new information or circumstances arise, or as market conditions change, the plan and advice are updated in real time. Employees can see the big picture 24/7—and understand how they are progressing toward their financial goals. Over time, AI anticipates next steps and offers advice to help employees see around the curve.

The Human Component

The human component is equally as important. Especially in a crisis, a financial adviser can head off disastrous financial decisions people often make under stress. The goals-based plan in the digital platform shows the adviser an employee’s total financial situation and facilitates conversations about the more complex aspects of financial decisions. The breakthrough in this approach is that the human and digital advisors are seamlessly integrated for the employee and accelerate their financial wellness journey.

The fiduciary aspect of the platform is another key innovation. A fiduciary has a legal and moral obligation to put the best interests of a client first. Technology has enabled both the digital and the human advisers to act as fiduciaries. For employers, fiduciary advice provides peace of mind by avoiding the introduction of the unscrupulous to employees. This standard helps ensure employees receive unbiased recommendations that have their best interest at heart. 

It’s Working

The market volatility of the past two months has resulted in employees being worried about their retirement and 401(k)s. We at BrightPlan provide insight to management teams and work with them to deliver tailored programs such as webinars and education about financial planning during a crisis.

Interestingly, our data show that employees are not making large withdrawals from their financial accounts. In other words, they are avoiding the classic mistake in a market downturn.

The digital platform factors market volatility into a goals-based planning approach, to calculate a high probability that a financial goal can be achieved even in worse market conditions. So if media headlines are sensational, but the probability of achieving their goals remains materially the same, the platform is helpful in reassuring employees and urging them to stay the course.

Anonymized employee data also plays another crucial role. It can identify knowledge gaps and trends in the financial wellness of employees even when there isn’t a crisis. With those insights, employers can promote under-utilized benefits or offer new benefits that can add value to employees. Today, most companies have little understanding of their employees’ financial wellness. AI and cognitive computing make it possible to know what was previously unknowable about the level of employee financial wellness and stress at a company.

A Responsible Corporate Citizen

The current situation has demonstrated that innovation has fundamentally changed the concept of financial wellness. During the crisis, it is playing an especially important role for both employers and employees.

Reducing stress increases productivity and strengthens employee loyalty. It also exemplifies corporate leadership and compassion in moments that really matter.

 

Editor’s note:

Marthin De Beer is founder and CEO of BrightPlan, a financial wellness platform built for the Fortune 1000.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Institutional Shareholder Services or its affiliates.

Practice Management May 8, 2020

Be Stronger in the Recovery

Todd Kading, president and co-founder of LeafHouse Financial, discusses the importance of flexibility and innovation when the tough times arrive.
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As we all spend more time working remotely, and putting our business continuity/disaster recovery protocols in place in response to the COVID-19 pandemic, it’s a time to take stock of those things that can help make doing our day-to-day business more viable in preparation for tough times.

I fear the sun has been shining on the equity investment world for so long that some companies haven’t done enough to prepare for the rainy days. As firms look to weather the current storm, and future ones, I would suggest looking at how you stand in four business areas: technology, flexibility, scalability and innovation.  

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Technology

Firms need their employees to be able to work remotely, with no need to perform functions in an office environment. This usually requires an investment in technology, which will allow companies to swiftly divert to a remote work system for the safety and security of employees and vendors.

At LeafHouse, while we’d prefer to be able to gather in our collaborative space, we know that remote working is the safest bet right now, and we can look to our previous technology investment as a reason we can do this. Additionally, we have invested millions of dollars over 10 years, optimizing the data integration needed to accomplish appropriate 3(38) oversight of 57 platforms with 40 recordkeepers and thousands of plans. This has provided us and our clients with flexible solutions on different platforms—and reassured our clients that we’ll continue to deliver on our contracts and promises no matter the environment.

Flexibility

For all advisers, a key component of their corporate philosophy must be flexibility and agility, especially during times of crisis. None of us is stuck in a one-size-fits-all methodology.

The more complex your network, the more sophisticated your offerings, the more you need to work flexibility into your methods. Technology, as we stated above, helps enable this. Equally important: To integrate with 30 or 40 varied recordkeepers, you need to make sure to hire and train very good people.

Scalability

During difficult times like this, employers and their employees are seeking increased service and lower costs. Working with a large 3(38) investment manager avails you of scale to receive these benefits, and provides advisers, employers and their employees with accurate and thorough reporting as well as the documentation and transparency to ensure proper oversight.

In our case, the billions of dollars we manage enables us to negotiate lower investment prices for our participants. These prices are very difficult for advisers or employers to negotiate on their own. This type of scalability delivers the sought-after increased service at a lower cost.

This also allows advisers to focus on their relationships with the employer and their employees. Advisers can spend their time on true plan oversight and on calming the fears of their clients in the current environment. This is where advisers excel and show their true value.

Innovation

By creating innovative tools and programs, we in the adviser community make our businesses more viable, long term. One benefit of such programs is they provide differentiation.

Advisers who partner with us, for example, have the benefit of our deep expertise in the environmental, social and governance (ESG) investment space. By providing them, and their clients, with what we believe is an ESG integration system compliant with Department of Labor (DOL) guidance, we show that the adviser cares about the unique needs of each plan, including those interested in investing in such a manner. No matter what part of the retirement plan spectrum you’re on, it’s imperative to ensure your business stays ahead of what clients are asking for.

Another example of creating innovation that leads to a diversified business is the formation of a participant-specific managed account experience. A diversified business, one including a dimension that’s truly client-centric, helps to bolster an organization during trying times.

As we live through this period of working from home, I encourage you to find some time to relax. Read more. Enjoy your family. Many of us travel a lot for work and rarely get time to eat three meals a day with partners and kids. This is the time for that. I also encourage you to think about the things you could do to bolster your business when there is a return to normalcy. The things you put in place today will lay the groundwork for stability during the next crisis and growth for the long term. Stay safe. Stay strong. Stay positive.

 

Author’s note:

Todd Kading is president and co-founder of LeafHouse Financial, a national discretionary investment manager and consultant for retirement plans. The firm manages more than $9.5 billion in retirement plan assets and acts in both a 3(21) and 3(38) fiduciary capacity for a multitude of private and public retirement plans, ranging from startups to large institutions across the U.S. 

Kading partners with advisers, recordkeeper and third-party administrator (TPA) institutions in providing fiduciary investment services to clients.

The opinions expressed are those of LeafHouse Financial’s investment team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward looking statements cannot be guaranteed.

LeafHouse Financial (“LeafHouse”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about LeafHouse’s investment advisory services can be found in its Form ADV Part 2, which is available upon request. LH-20-34

Editor’s note:

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Institutional Shareholder Services or its affiliates.

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