Yet one thing is clear: U.S. workers have developed some pretty bad money habits, and organizations are realizing they’d better tend to their employees’ financial well-being as a way to maintain and improve their own fiscal health.
“If employees don’t save for retirement and budget well, that could become a burden on a company,” said Steve Vernon, consulting research scholar at Stanford University’s Center on Longevity. “You’d almost have to be Rip Van Winkle to not know people aren’t saving.”
It’s generally accepted that financial wellness falls under employer-based programs that take in the total financial picture to improve workers’ behavior and attitudes toward preparing for emergencies and retirement while maintaining control over daily personal expenses.
Financial wellness is among the hottest topics in benefits today. A recent Aon Hewitt survey showed that 93 percent of employers are focusing on their workers’ financial well-being this year compared with 76 percent in 2014.
Company Banks on Financial Wellness Plan
Because of the banking meltdown coupled with severely spiking health care costs, CoBiz Financial launched a financial wellness program as the crisis hit in 2008.
“No industry was hit harder than financial services in 2008,” said Sue Hermann, the company’s senior vice president and director of communications. “We were seeing health care costs escalating, and with the financial crisis, we knew our employees were experiencing a lot of stress and uncertainty. So as an employer, we wanted to give them more tools.”
The Denver-based financial services company expanded its existing overall wellness program to include a financial component. The company connected workers with an employee assistance program, which included a component to help workers make solid financial decisions. CoBiz was also focused on bumping contribution rates to their 401(k) plan, but not at the expense of other items on workers’ personal budgets.
Overall, Hermann said the program has helped workers manage finances. As an example, she said about 40 percent of workers who attended one-on-one financial sessions over the past year bumped contribution rates to the company 401(k) plan to an average 8.8 percent of salary, from the companywide 7.3 percent average.
Phyllis Johnson, an assistant vice president for credit administration at CoBiz, said the financial wellness program gave her confidence to make changes in her strategy. Before sitting down with an adviser from the Principal Financial Group, Johnson was contributing 10 percent of her salary to her 401(k) and overpaying on her mortgage. She didn’t have any serious money issues, and thought her strategy would work.
After setting a goal for retiring in about six years, Johnson learned it would be better to make the regular monthly mortgage payment and bump her 401(k) contribution to 20 percent of salary. Her goal is to try and live off 401(k) assets until she turns 70, so her Social Security paycheck will be larger at that age.
Johnson said the changes weren’t hard, but she would have never considered making these moves without the financial wellness program. Now she is planning a trip to Paris to celebrate her 60th birthday next year and feels good about her financial situation.
“At this point I don’t feel like my lifestyle is compromised by the changes,” she said.
“Companies are also waking up to the idea that traditional financial education only works for a small population,” Vernon said. “People really need a kick to get engaged, and they need more than just facts and figures.”
A few years ago, financial wellness wasn’t even on the benefits radar screen, said Matt Fellowes, founder of HelloWallet, a Web and mobile application financial guidance company. Fellowes said his research shows no press coverage using the phrase “financial wellness” between 2004 and 2007.
“This market has really come out of nowhere,” said Fellowes, who was previously a Brookings Institution fellow before creating HelloWallet in 2009.
But the need has been building. Companies have moved to more consumer-driven benefits structures like 401(k)s and high-deductible health plans that use health savings accounts. Today, workers are expected to be savvier in their everyday spending and saving habits as well as know how to save and invest for retirement, and spend health dollars wisely; multiple studies show employees are ill-equipped to succeed.
Dealing With the Future, Today
In terms of having a successful retirement strategy, employees “can’t deal with the future if they can’t deal with today,” said Alison Borland, senior vice president for retirement strategy and solutions at Aon Hewitt.
Meanwhile, the American Psychological Association has shown that money and finances have been the top stressor for Americans since starting the Stress in America survey in 2007. And nearly half of full-time employees feeling some kind of financial stress believe that employers should help them solve financial security issues, according to MetLife Inc.’s 13th annual “Employee Benefit Trends Study.”
Bottom line? Americans are stressed out financially and siloed lines of education on 401(k)s and health care are providing little success.
“What’s been done in the past 10 years has been an experiment,” said Shane Bartling, senior retirement consultant for Towers Watson & Co. “Those lessons are leading to a more informed approach to get employees engaged.”
Now, employers are accessing existing tools in benefits programs and new partnerships are being formed to provide better data, tools and communication strategies.
For example, many companies have tapped into the existing portal found through 401(k) record-keepers to offer more holistic financial education, and not simply for retirement savings.
The record-keeper’s main job is to keep track of all the individual 401(k) accounts in the plan. Record-keepers know how much money is in an account, how much is being contributed and where it isinvested. Participants usually access their accounts through websites run by record-keepers.
Record-keepers “do have access to the infrastructure to help deliver messages,” said Lori Lucas, executive vice president and defined contribution practice leader at consulting firm Callan Associates. “A lot of financial wellness programs are trying to plug into the record-keeper because they have a direct link to the participant.”
Lucas adds that many record-keepers are incorporating new financial wellness initiatives like rating scores, combing participant data to learn about behavior, and tailoring messages and using mobile apps to deliver communications.
“We are seeing more honed and targeted messaging,” Lucas said. “We’ve evolved as an industry and have learned that various demographics react differently not only to the message but also to the channels” delivering the message.
Some record-keepers are pairing with financial planning services to complete the picture for workers. Last year, HelloWallet partnered with investment services firm Vanguard Group and separately with 401(k) record-keeper and human resources consultant Aon Hewitt. In a similar move, rival LearnVest was acquired in March by Northwestern Mutual Life Insurance Co., which in addition to its insurance products runs a 401(k) record-keeping service.
For Aon Hewitt, the partnership allows participants to access all personal finance information on one site. Workers whose companies use Aon Hewitt as their 401(k) record-keeper can look at their retirement and health plans as well as get help understanding financial choices. Aon Hewitt currently services 365 defined contribution plans for 200 large clients. A spokeswoman said HelloWallet is an optional feature that is used by some clients.
When signing up or learning about certain services, participants get prompts asking about whether they’d like to review other financial issues. Participants also get more than just a retirement readiness score; they get an overall financial wellness score to help them see the whole picture, Aon Hewitt’s Borland said.
Now Aon Hewitt can aggregate data so companies can better understand the barriers and gaps workers have, so that more effective solutions and messaging can be created to help workers improve financial wellness scores, she added.
“We are trying to create an integrated experience,” Borland said. “We are still just at the tip of the iceberg in terms of what we can accomplish.”
By accessing participants’ financial accounts, HelloWallet gets an overall snapshot of a workforce’s saving and spending habits. Fellowes said HelloWallet can tell whether high-performing workers eat too much fast food, if employees are spending needlessly on banking fees or whether participants are using their 401(k) accounts for personal loans as opposed to retirement savings.
HelloWallet can reset communication strategies rapidly as well, testing different formats, time of day, subject lines and other tweaks to get the message that helps drive good financial behavior to users.
“People are ingrained in their behavior, and it’s hard to change decision-making,” Fellowes said. “With our applications, we can aggressively experiment to figure out what changes people’s minds.”
The number of strategies and providers are popping up rapidly, but do they work? Nearly a quarter of HR executives surveyed for an August 2014 report by the Society for Human Resource Management said their financial education programs don’t.
Stanford University’s Vernon said that effective technology is so new that it is too early to tell whether financial wellness programs work. Financial wellness doesn’t have as clear a link to success like health wellness, where companies can see a reduction in costs when using those programs.
“We’ve got to try something though to get people to engage and get them to take better care of their finances,”Vernon said.
Fellowes admits the early stages of HelloWallet saw limited progress, and that the company went through a lot of revisions before it started seeing changes in worker behavior. A recent HelloWallet report showed median HelloWallet users increased their financial wellness score by 17 percent after one year of using the service.
“I disagree that they can’t work,” Fellowes said.
Lucas agrees that there has been a great deal of recent progress, but overall success is mixed. There is certainly no uniform strategy that will work, she added. Companies considering expanding or starting a financial wellness program should weigh whether the outcome is worthwhile.
“There is a lot of great innovation that has led to some limited success, but we have not found a silver bullet,” Lucas said.