Voice of the American Worker

PLANADVISER: You’ve mentioned that the financial services industry is going through a period of “re-centering” that relates to the intersection of financial wellness and the workplace. Can you unpack this idea for us?

Yaqub Ahmed: Statistics from the “Voice of the American Worker” study show that the average American worker is struggling with financial health, thus affecting the individual’s overall well-being and productivity at work. At the same time, employers are embracing the challenge of improving their employees’ total well-being by seeking ways to become the financial epicenter for their staff.

We’ve realized the importance that a robust workplace benefits package has on employee morale and retention. As one gets older, you have a more complex set of needs, and a robust benefit offering provides a lot of security—I feel that way for myself and my family.

The study does indicate that we don’t give employees enough credit. They understand the benefits of retirement savings, and they recognize the advantage of a good benefits package. For instance, according to the study, the majority of respondents would choose long-term financial health over immediate monetary gains, with most preferring a boosted 401(k) match to a raise.

Furthermore, “retirement” has become an antiquated term, and most workers don’t view retirement as they did in the past. Employees are more interested in financial independence with the option to pursue whichever lifestyle they desire.

PA: How can Franklin Templeton support financial wellness for employers and advisers?

Ahmed: Again, looking at the stats, 79% of workers who are on the path to financial independence say, “I want my workplace to provide more resources to help me with my overall financial well-being.” And seven in 10 workers say, “I wish there were a ‘Fitbit’-like program to easily track my financial well-being all in one place.”

We strongly feel that the workplace is the financial epicenter for the majority of Americans. We see a future of collaboration on how to move the needle. It will take a village—it will cut across asset managers, recordkeepers, insurance firms and wealth managers, and we must provide better access to retirement plan advice and sustainable retirement income.

Our biggest focus is on providing more personalized solutions across the board. And we are investing in technology that operationalizes tech-enable personalized solutions that will be distributed through strategic partnerships. Employer-sponsored retirement plans currently tend to lump employees into categories based on their anticipated retirement year. We think there’s a place for target-date funds [TDFs] and that they aren’t going away, but we need to do better than a single-factor approach.

Innovation disrupts everything eventually and age-based glide paths are no exception. The Pension Protection Act of 2006 was the catalyst to exponential growth in target-date funds. TDFs have served participants well, creating better participation, higher savings rates and more diversified portfolios, but they haven’t seen significant innovation in nearly two decades. Technology is allowing us to modernize and enhance our approach, so we have an obligation as an industry to continue this evolution.

PA: You mention your focus on providing more personalized solutions. How are you doing this?

Ahmed: To help optimize the assurance of workers meeting their financial goals, their individual situations need to be considered when creating an investment plan.

“Voice of the American Worker” responses indicate that, as financial futures become more fluid, personalization is non-negotiable. Seventy-three percent expect their financial management apps and programs to use what these know about them to suggest the most appropriate resources, while 62% say, “unless I’m getting personalized recommendations, I feel like financial education isn’t very helpful”—68% of men, vs. 54% of women.

We have created Goals Optimization Engine (GOE^TM), which personalizes and optimizes each participant’s portfolio. It aligns employees to a choice of personae based on their current financial situation and goals, with the aim of helping investors achieve those goals with more assurance. We think this resonates with what our survey respondents told us they want.

PA: How do these managed advice accounts affect the role of the retirement plan adviser?

Ahmed: Now is the time for the retirement specialist advisers to really embrace their own role at the center of more workers’ financial lives. … One might call this “enlightened self-interest.” It’s that combination of digital and human interaction and coaching that participants want. We are pleased to provide a range of solutions to help financial advisers navigate this changing landscape and deliver solutions to plan sponsors that help plan participants reach their goals. I feel that the DC [defined contribution] adviser and specialist is the trusted intermediary for the plan sponsor, and I think these professionals are ideally suited to deliver it.