Keys to an Effective Financial Wellness Program

Financial wellness is a topic receiving a greater amount of attention in recent years, but many plan sponsors are unaware of what that really means for their employees. Financial wellness is vital to ensuring employees feel secure about their financial well-being, helping them meet current, future and ongoing financial obligations. Additionally, financial wellness programs help maximize participation in the company’s retirement plan. While there proves to be many benefits by offering a financial wellness program, it is not yet universal. If it isn’t already, establishing a comprehensive financial wellness program should be a priority for plan sponsors. We review five key components to making your wellness program effective.

Benefits of an Effective Financial Wellness Program

So how important is financial wellness? The 2018 Workplace Benefits Report by Bank of America/Merrill Lynch, which measured employer/employee attitudes toward financial wellness, found:

• 91% of employees participating in financial wellness programs found them effective.
• 95% of employers offering such programs found them effective in meeting company goals.

Furthermore, employers found these programs reduced employee financial stress, improved productivity and performance, lowered the company’s healthcare costs, and improved turnover rates.

Key Factors to an Effective Financial Wellness Program

Personalized

It is important to understand that not every employee’s needs and goals for financial wellness are the same. Younger employees concern for financial security may focus more on paying off debt associated with education or saving for a first home, while older employees nearing retirement desire a plan providing stable income during the years when they choose to no longer work. Given the variety of financial situations each employee may be experiencing, an effective financial wellness program should recognize these differences. Your program should be personalized, emphasizing topics relevant to your employees based on their age, income, financial goals and objectives to help them meet their specific needs.

Emphasized

When should an employee begin planning for retirement? As soon as possible. Many employees do not fully comprehend the benefits of contributing to a retirement plan; they view a retirement plan as just a savings account. The power of compounding is lost when individuals wait until they feel financially secure – a point which may never come, resulting in lost time and added stress. A good financial wellness program discusses the importance of planning for retirement, managing expectations for income needs when retired, and getting started as soon as possible to create as large a potential nest egg as possible.  The plan sponsor needs to communicate repetitively and reinforce the importance of participation in the financial wellness program to assist employees on the path towards retirement readiness.

Inspiring

Most plan sponsors think that financial wellness programs mean just educating employees. However, it’s more than financial education – it’s inspiring them to take action and helping them create habits so it’s consistent to achieving their goals. The Workplace Benefits Report found that there are many barriers keeping employees from improving their financial well-being, including:

• Identifying their financial goals
• Not knowing who can help
• Not understanding how, where to start or what to do
• Afraid of making mistakes
• Thinking of finances is uncomfortable

When these issues are addressed and employees feel comfortable with their short- and long-term financial goals, they are more likely to take action and participate in your retirement plan.

Actionable

Your financial wellness program should provide employees with the information needed to make the proper decisions on where they are financially, where they want to be in the future, and how best to achieve financial wellness. There are a few ways to provide this support, including on-site or off-site seminars, one-on-one personal assessments, and online or virtual education. It is vital to offer different ways to provide support.

Moreover, offering tools which provide education on topics personal to the employee are helpful, such as retirement calculators, planners, and plan comparison tools. There are also DIY widgets used to calculate future Social Security benefits and planning tools which synthesize goals to create a financial plan and assist in the management of cash flow. These offerings improve awareness of a financial wellness benefit and increase participation.

Ongoing

The last, if not most important factor to an effective financial wellness is ongoing support and services. These efforts, such as financial seminars or personal assessments, should be consistent and not a one-off. Working towards financial well-being can be a long process, so your program should be built off the same principles of saving for retirement – putting them on a path to reduce financial stress and achieve the financial future they envision.

More importantly, no financial wellness program can be successful if it is not monitored for its effectiveness. Annual surveys are one way to gauge satisfaction and assess areas in need of improvement. Ongoing monitoring is essential and important, if for no other reason, it gives employees an opportunity to give voice necessary to make the benefit meaningful.

Let PlanPILOT Help

If you’re interested in developing a comprehensive financial wellness program for your employees but aren’t quite sure where to start, PlanPILOT can help. We deliver retirement plan advisory services to 403(b), 457, and 401(k) plan sponsors and can work with you to build a program that’s customized for your plan and plan participants’ needs.

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