Employer-Provided Financial Wellness Needs More Than Nudges

(Story by Sean Forbes originally appeared in Bloomberg BNA)

Aug. 30 — The dismal reports keep pouring in: Americans are struggling with their finances—and now an increasing number of employees are asking their employers for help with managing their finances.

Nearly half of Americans, regardless of income level, can’t cover a $400 emergency expense without taking a loan or selling something. Most can’t correctly answer five questions covering aspects of economics and finance encountered in everyday life.

Personal finance issues distract workers from their jobs. Financial education alone probably won’t help.

Employers are stepping up to the plate to help their workers. More than half—56 percent—of employers are either creating or expanding their financial wellness programs beyond retirement savings in 2016, up 10 percentage points from 2015, Aon Hewitt found. And the vast majority are doing so because it’s “the right thing to do,” the consulting firm found.

Doing the right thing means having a program that nudges and encourages employees to get back on fiscal track. Effective financial wellness programs share characteristics, such as being voluntary and incentive-based. They also typically are supported by employers throughout the year, rather than during open enrollment periods, like other employer-provided benefits.

Effective Programs

The financial wellness program at San Antonio-based USAA was designed to assist employees with getting control of the full scope of their finances, such as setting a personal budget, handling regular and unexpected financial challenges, establishing a will and retirement planning, Peter Wald, enterprise medical director at the San Antonio-based financial services company, told Bloomberg BNA.

To make sure that employees get on track for the year, USAA’s financial wellness kicks off in January to capitalize on New Year’s resolutions, and then continues with “pop-up” challenges to keep things fresh, Wald said.

Henry Albrecht, chief executive officer at Bellevue, Wash.-based Limeade, and USAA’s wellness vendor, told Bloomberg BNA that wellness programs, whether financial or health, fail when they force employees to go through multiple hoops to get a financial reward.

“That’s all fine, but if that’s all you do throughout the year, a) it will feel punitive and b) it won’t really work, because you won’t change any behaviors,” Albrecht said.

‘Peanut Butter’ Messaging

Employers also should personalize their communications and programs to their workforce, Betsy Dill, senior partner and financial wellness advisory leader in Mercer’s Los Angeles office, told Bloomberg BNA.

That means tossing “the peanut butter approach in which there’s only one e-mail or communication approach that goes out to everybody,” Dill said.

By way of example, Dill said an employer could design a wellness program that targets women in various life stages, such as marriage, divorce or starting a family, and in various career stages, such as at the beginning of a career or when approaching retirement.

Beyond Auto

Automatic enrollment of workers into retirement plans and automatic employee contribution increases have been popular and proven strategies to help workers kick-start their retirement savings since the strategy was given the green light by the Pension Protection Act of 2006. Can these same features prompt workers to use financial wellness programs as retirement-planning tools?

Beyond auto-enrollment, much more can be done to nudge workers even further, Annette Grabow, retirement plan manager at Philadelphia-based Sonepar USA, a business-to-business distributor of electrical, industrial and safety products, told Bloomberg BNA. When workers are automatically enrolled, “inertia takes over” and they can lose track of financial planning.

One technique Grabow recommends is a check-in after employees finish a financial workshop. Based on her experience, she said employees had been asked to list two financial goals based on what they had learned, and told that in 30 days, there would be a check-in to see if they had accomplished either one or both of those goals. Upward of 80 percent of seminar participants had accomplished at least one goal, she said.

Return on Investment?

Do financial wellness programs generate a positive return on investment for employers?

USAA’s Wald said taking the monetary ROI pulse of a wellness program shouldn’t be the sole evaluation measure.

Grabow urged patience.

“What I learned from my past experience is start simple, start working on culture, as well as start working on financial wellness,” Grabow said. “And you just have to keep layering and adding and improving over time. It does not happen overnight.”

To contact the reporter on this story: Sean Forbes in Washington at [email protected]

To contact the editor responsible for this story: Jo-el J. Meyer at [email protected]