Less Talk, More Action: It’s Time to Implement a Financial Wellness Program

Increasingly, employers are focusing on employee wellness, customizing benefits to meet the diverse needs of a workforce that spans multiple generations. Offering a holistic benefits program isn’t just good for recruiting and retention, it can help improve employee productivity and provide a boost to employers’ bottom lines.

One of the key pillars of an employer-sponsored wellness program is financial wellness — measuring and improving the state of overall financial health and well-being. Financial wellness programs are designed to foster positive behavior changes to help employees feel more confident about managing their money and achieving their financial goals.

More and more, employers are turning to financial advisors to help them select, implement, manage and support this important benefit. Financial wellness is no longer a “nice-to-have” benefit — it’s a “must-have.” This presents you a unique opportunity to provide additional value to your plan sponsor clients by helping their employees become financially empowered.

Why Financial Wellness Matters

Why is financial wellness so vital to today’s workforce? Two-thirds of American adults report that money is their top source of stress, according to the American Psychological Association.[1]

What’s more, financial stress costs U.S. businesses $500 billion annually[2] because employees are bringing their money worries to work, which impacts on-the-job performance. A financially stressed employee is more likely to make mistakes and have higher rates of absenteeism and presenteeism (at work but not fully functioning). In addition, distractions due to financial worries may result in more injuries in the workplace, causing employees to incur costly medical bills and need more time off to recover.

However, research shows that having happy, healthy employees increase workplace productivity and safety, reduce health insurance premiums, which results in lower rates of absenteeism and improves retention. Another benefit is increased profitability, which may create opportunities for businesses to provide employees with additional bonuses and profit sharing incentives — a positive impact they’ll see in their paychecks. Employers can achieve these benefits, and more, by implementing an effective, well-structured financial wellness program.

Poor Financial Health is a Rampant

Financial wellness in the workplace is essential because the majority of employees are struggling to make ends meet. Four in 10 American adults say they would have trouble covering an unexpected $400 expense,[3] and almost 80% of U.S. employees are living paycheck to paycheck.[4] What’s more, nearly a quarter of Americans have no retirement savings.[5]

This constant financial hardship causes employees to rack up credit card debt, take loans from their 401(k) accounts and resort to high-interest, predatory payday lenders — along with other behaviors detrimental to their financial well-being — just to survive.

These decisions have lingering consequences, including bankruptcy. The majority of Americans (66.5%) have declared bankruptcy due to medical issues, such as hefty bills or time lost from work.[6] Job loss and poor or excessive use of credit round out the top three causes of bankruptcy[7] — often a last resort for those experiencing a financial crisis. Hundreds of thousands of dollars in medical bills and other debts can quickly deplete savings, including retirement accounts, college education funds or home equity, provided these safety nets are available in the first place. Three in 10 Americans don’t have an emergency fund.[8]

That is why it’s vital for employers to offer benefits designed to help ease employees’ financial headaches and heartaches. A comprehensive financial wellness program is a great way for employers to mitigate the money worries plaguing their workforce.

3 Ways to Help Reduce Financial Stress

An integral part of financial wellness is helping employees create financial security not only today, but in the future. One way employers can help nudge employees toward this goal and reduce their financial stress is to automatically enroll them in the company retirement plan. Auto-enrollment is an effective way to get employees to save for retirement because employees are enrolled in the plan at a default deferral rate, such as 8% of their salary, with the option to opt out or change the contribution level. However, once enrolled in the retirement plan, most employees don’t miss the money. Their retirement savings are out of sight, and therefore, out of mind before they receive their paycheck, and then they simply adjust to live on their take-home pay.

The recent passing of the landmark Setting Every Community Up for Retirement Enhancement Act (better known as the SECURE Act) has made it even easier for employers to use auto-enrollment to help employees save for retirement. Under the new law, employers can enroll employees at a 15% default contribution rate. This is meaningful, because many experts agree that employees should aim to save 15% of their pay in a workplace retirement plan each year to ensure they have enough income to maintain their lifestyle in retirement.

However, not all employers are comfortable with auto-enrolling employees at a 15% deferral rate.

In those situations, financial advisors would do well to encourage employers to implement a sidecar emergency savings benefit as part of their financial wellness program. The way it works is, employers offer an after-tax emergency savings option alongside the 401(k) plan. For example, employers can structure the benefit to auto-enroll employees into the retirement plan at a 10% pre-tax deferral rate, and in addition, offer them the option to set aside an additional $1,000 in after-tax dollars in an emergency fund. Such a program creates significant savings momentum for near-term and short-term financial goals. Employers can sweeten the deal by offering matching contributions to employees’ emergency savings accounts.

Empowering employees to create a savings cushion in a sidecar emergency account can give them peace of mind, while also preventing them from engaging in behaviors that are contrary to achieving their goals, such as taking 401(k) loans or relying on payday lenders. It also helps boost employee retention and satisfaction — three in four employees said they find an employer-sponsored emergency savings program appealing, and they would be likely to participate if their employer provided matching contributions.[9]

How Financial Advisors Can Help

Financial advisors can add value by partnering with employers to implement a comprehensive financial wellness program that meets the needs of employees and helps the company achieve its goals.

One way financial advisors can accomplish this is by providing personalized guidance and assistance for employees in all stages of life, from recent graduates struggling to pay off student loans to near-retirees challenged to decide when to collect Social Security. Hands-on financial education can also be paired with a dynamic budgeting tool, for example, to help employees track their income and expenses, giving them an even better idea of their overall financial health and where to improve to achieve their goals.

How can you convince employers of the benefits of financial wellness? One way is by providing guidance on how a holistic program may help employers lower health insurance premiums and increase productivity by creating a happier, healthier, less financially stressed workforce. A dynamic calculator like this one can help employers understand the true cost of financial stress to their bottom line.

In addition, consider explaining that access to a financial advisor is a strong recruiting and retention tool for employers. Employees who feel their company cares about them are twice as engaged at work, four times less likely to suffer burnout and nine times more likely to stay with their employer for three or more years.[10] These are all value-add to an employer, and all the more reason for them to partner with you.

Keep in mind as you research various financial wellness platforms and offerings, your knowledge is valuable to employers, too; as such, you should be compensated for your expertise and time.  As the financial wellness program increases retirement plan assets and contributions to other related benefits, and as you deepen relationships with individual employees, these are all opportunities to show your worth and boost your revenue.

Moreover, you should benchmark the program’s effectiveness annually, by monitoring employee uptake, satisfaction and behavior changes. One of the best ways to analyze an employer’s return on investment from a financial wellness program is to look at the collective retirement readiness of their workforce, and the collective cost of delayed retirements. In other words, if retirement readiness increases, and the cost of delayed retirements declines, you know you’re doing something right.

Employers can no longer afford to ignore the toll financial stress takes on workplace productivity and profits. As a financial advisor, you are uniquely positioned to bring value to your employer clients by helping them implement a financial wellness program to soothe their employees’ money stress and improve their overall financial health while increasing productivity, lowering health insurance premiums and creating a happier, healthier, more financially stable workforce. Financial wellness is no longer just a benefits decision — it’s a financial planning issue. You can help employers bridge the gap.

[1]American Psychological Association. “Stress in America 2019.” November 2019.

[2] Salary Finance. “The Employer’s Guide to Financial Wellness.” 2019

[3] Federal Reserve. “Report on the Economic Well-Being of U.S. Households in 2018.” May 2019.

[4] CareerBuilder. “Living Paycheck to Paycheck is a Way of Life for Majority of U.S. Workers.” August 2017.

[5] Federal Reserve. “Report on the Economic Well-Being of U.S. Households in 2018.” May 2019.

[6] American Journal of Public Health. “Medical Bankruptcy Still Common Despite the Affordable Care Act. February 2019.

[7] Investopedia. “Top 5 Reasons Why People Go Bankrupt.” Updated February 2020.

[8] Investopedia. “Top 5 Reasons Why People Go Bankrupt.” Updated February 2020.

[9] Investopedia. “MarketWatch. “The ‘Sidecar’ Plan That Could Soon Be Attached to Your 401(k).” Research cited from Transmaerica Center for Retirement Studies, Prudential and AARP. October 2019.

[10] Limeade Institute. “New Limeade Platform Delivers a Unified, Human Employee Experience, Backed by Science.” April 2019.

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FDI Tools That Can Help

Value and Fee Benchmarking Report, a peer-to-peer evaluation report that shows a comparison of the existing plan to other similar plans and can provide guidance on how changing certain plan features could help the employer offer a more competitive retirement plan benefit.

Our report follows a 5-step process that is fair and repeatable.

  1. Customize the Benchmark Group

    We use numerous factors to build a benchmark group from our proprietary database that is customized for each peer group using mathematical models designed to optimize the degree of accuracy.

  2. Review Service Provider Quality

    The DOL has noted in prior rulings that it is allowable to consider the Quality of the Service Provider when determining Fee Reasonableness. We provide a logical framework to analyze this issue.

  3. Assess Scope of Services

    We examine the scope of services being provided so plan sponsors can understand how the services they are receiving are impacting the cost structures of the service providers.

  4. Examine Value Delivered

    We examine the Value Delivered in terms of helping plan sponsors do their job as a Responsible Plan Fiduciary and to participants in terms of helping them save for retirement.

  5. Evaluate Fees

    Finally, we track and compare fees to the Benchmark Group and to FEEPOINT®. FEEPOINT is a proprietary fee calculation designed to account for fiduciary status, extra services and extra meetings that are not found in the typical plan.

Download a sample Value and Fee Benchmarking report

About Author:

Craig Rosenthal, Head of Strategy and Chief Marketing Officer

Craig is Head of Strategy and Chief Marketing Officer for Fiduciary Decisions. In this role, he is responsible for driving Product and Partnership strategy as well as the overall messaging and marketing for the firm.