Framing the Financial Wellness Conversation for Reluctant Clients

In the past, teaching participants about their retirement plan centered on investment topics such as the difference between small-cap and large-cap funds.

Today, participant education has shifted, focusing on saving and managing debt—the true determiners of retirement readiness. As financial wellness has increasingly become a topic of interest to plan sponsors, the challenge for the industry is to make sense of what, in practice, it really means. For instance, how is it delivered, how is it benchmarked, and why are employers the logical ones to offer this type of education?

At the 2017 PLANSPONSOR National Conference, held earlier in June in Washington, D.C., leading providers in the participant education field discussed the financial wellness industry; how financial wellness is defined at their own individual company; and how it has evolved.

George Lambert, senior manager of business development, LearnVest Inc., said financial wellness has become a dynamic industry with new entrants every week. He defined financial wellness as “the ability to feel confident about your money and optimistic about the future by having proper access to digital tools and support from a real planner.” To expand on that, he said, “Financial wellness programs should deliver a financial plan that is simple, actionable, realistic and personalized to an individual’s unique circumstances.”

Financial wellness is a term devalued, in many ways, due to context, according to David Snyder, CEO, Perspective Partners LLC. “But it’s a measure of how strongly a participant sees his financial situation as empowering his life as opposed to burdening his life, so his finances are not a stress factor.” Perspective Partners sees financial wellness as more than just a path to retirement—the presence, or absence, of it affects saving for other life cycle events such as a college fund for one’s children.

Adam Hills, senior vice president and head of institutional business solutions at Ayco, a Goldman Sachs company, said Ayco has spent considerable time discussing the topic. “We have used terms such as ‘financial literacy,’ ‘financial education,’ and now it’s ‘financial wellness.’” Hills views the model of financial wellness as being “‘holistic.’ “You’re looking at all angles; it’s not just retirement and investments,” he said. “How do you align the company’s goals with the employees’ goals? Finding the right balance is what makes for success—what we now call a financial wellness plan.”

As Hills sees it, the workplace is the right venue for financial wellness programs—basically because this is where many employees have the most money saved. Plan sponsors and providers can capitalize on episodic events at the sponsor’s company, such as when raises are given, using the opportunity to reach out to participants. At those times, they can layer on other information about financial wellness, which, for the participant, strengthens the overall concept.

When discussing the return on investment (ROI) of financial wellness, Snyder pointed out that the subset of employees who have poor financial wellness could create problems for a different subset of the employee population. For instance, failing nondiscrimination testing can limit the use of a company’s nonqualified deferred compensation (NQDC) plan. Therefore, it is important to have a comprehensive view of one’s employees.

Snyder also noted, the transition from defined benefit (DB) to defined contribution (DC) plans has occurred, but the elephant in the room is the cost of health care. For this reason, one should not necessarily think about financial wellness without factoring in the contributions made by the company’s benefits overall.

Lambert concurred that it is hard to talk about retirement without touching on emergency savings, credit card debt and people’s other competing priorities. The retirement plan is the core saving vehicle, but other benefits are also important, he said.

NEXT: Timing and method of delivery

“How financial wellness education gets delivered depends on the work force,” Lambert said. “There isn’t a single answer.” Long-haul truckers will need a different method of delivery than will another employee base, he said, “so it’s really about working as collaboratively as possible with all the providers to make sure the employers’ and employees’ needs are met while, at the same time, living within the budget constraints.”

Lambert suggested a delivery method that syncs wellness education with a timed event such as taxes. For instance, creating a campaign around what employees can do with their tax refund can be an opportunity to educate them about making additional retirement account contributions or topping off their health savings account (HSA) contributions.

The plan sponsor—and adviser, too—needs to establish trust when it comes to a financial wellness program, Hills observed. This may be especially true because the programs increasingly rely on technology and social media, which eliminates much of the human factor. “There is a gravitational move away from simplicity. We’re in a place now where it’s not only comfortable and convenient, but it’s expected to reach more people through technology.”

In-person communication also syncs well with the trust conversation, Hills added. Once trust is built, for instance, an adviser may learn things about an employee’s financial situation that he didn’t know previously. “You can get to the softer side of things. Use of technology will [seem] more comfortable after the demographic switch [from the Boomers to the Millennials] because technology is becoming more and more an accepted part of our lives.”

LearnVest takes a different approach, Lambert said. “It’s all about behavioral change [using] a hybrid approach, such as with online tools, mobile apps and calls. To really change behavior over time, you need to have high-frequency interaction with the financial wellness program on a mobile device, where you can have long-term engagement and accountability that a real planner can provide. We think marrying these things together optimizes engagement and puts you on a path to make ongoing progress.”

Ultimately, the biggest driver of a financial wellness program’s success is plan sponsor enthusiasm, according to Lambert. “Co-branded communications where there is a recognizable name or signature from a senior level HR [human resources] person is how we start building trust in explaining the program. And privacy is a big thing. Making sure individuals know we’re not sharing [their personal information] with their employer.”

Snyder recommended taking a long-term view and managing expectations. “Start simple. Don’t think you’ll solve all problems in one campaign. There may be logistical problems, so be sure to work with the whole provider network. In addition, it’s important to not let your objective opinion be duly influenced by past pain.”