Financial Wellness Program Effectiveness Being Questioned
Financial wellness programs are getting a lot of positive press. There seems to be no shortage of favorable reports for employees who have access to financial wellness programs. However, it appears that proving the effectiveness of financial wellness programs is a challenge for employers and recordkeepers.
A study from research and consulting firm Cerulli Associates cited in an article in InvestmentNews. Financial wellness programs provide participants with holistic financial advice on topics such as budgeting, managing healthcare expenses, and debt management. Financial wellness programs have become more prevalent in the past 10 years and a growing number of employees across all generations have struggled with various personal finance concerns. This includes paying off student loans to saving for retirement.
Implementing financial wellness programs is costly for plan sponsors and recordkeepers. Many are having difficulty justifying the cost, especially since it’s difficult to measure their return on investment (ROI). Part of that may lie in the fact that 10% of firms don’t measure the effectiveness of their financial wellness programs, while 5% said they lack a way to determine if their financial wellness program is successful, according to Cerulli.
This isn’t a new problem. A November 2018 study from Bank of America Merrill Lynch reported that about half of employers were offering financial wellness programs and that they were struggling to understand the value of these offerings. That study found that while 43% of industry experts see value in financial wellness programs, they also believed there was room for providers and programs to improve. Moreover, 12% of respondents found little value in financial wellness programs, and 7% weren’t sure of their benefits.
Just shy of a year later, ROI remains a challenge to implementing financial wellness programs. Initiatives related to employees’ well-being are particularly difficult to justify because they have few quantitative measures by which to evaluate their effectiveness. Cerulli’s managing director of U.S. research, Bing Waldert recommends that providers collaborate with plan sponsors to set specific goals for financial wellness programs, along with reasonable timeframes in which to achieve them.
Mr. Waldert also said that financial wellness program providers would do well to share data with plan sponsors to demonstrate how participant behavior is changing over time as a result of the program. InvestmentNews cited an example where financial wellness programs provider Financial Finesse published a case study showing that contributions to 401(k) plans and health savings accounts increased dramatically over a five-year period among employees who participated in a financial wellness program.
According to InvestmentNews, “More subjective goals like improving financial literacy or decreasing employee stress are much more difficult to quantify but still worthwhile.” Mr. Waldert called the correlation between increased worker productivity and financial wellness programs the “holy grail” for these offerings.
The 2018 BAML study found that success in financial wellness programs improves when employers take the time to get to know their employees and the specific needs of their workforce. InvestmentNews offered up a few options: “… track participant behavior on a recordkeeper’s digital platform. User engagement on the website can give insights into how employees are feeling. Providers can also work with retirement plan advisers to manage relationships and consolidate data.”
Giving employees what they want (within reason, of course) and “hyping” those solutions can go a long way toward increasing the success of financial wellness programs. To be sure, employers need to think beyond retirement savings when it comes to implementing financial wellness programs topics. Other key areas of employee interest may include building credit, paying off student loans, and personalized financial education. Again, getting to know their workforce and their needs can play a key role in helping employers determine where to focus their financial wellness programs for maximum effectiveness.
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