How 401(k) advisers can make financial wellness programs more effective

Implementing a financial wellness program without any means of measuring its success is a failure, according to advisers and analysts

Dec 28, 2016 @ 2:45 pm

By Greg Iacurci

Financial wellness has become a buzzy topic in the realm of defined contribution plans.

Employer interest in improving their employees' financial well-being is growing. And with retirement savings inevitably bound to an employee's finances, 401(k) advisers need to wise up to the swelling number of financial-wellness services or risk being leap-frogged by competitors.

But advisers shouldn't be lured into a false sense of security by simply implementing a service for clients; they should also subsequently help clients measure the success of those programs, advisers and analysts say.

“I think we're really at the very, very beginning of financial wellness being effective,” Fred Barstein, founder and CEO of The Retirement Advisor University and The Plan Sponsor University, said. “Ultimately, it will be a failure if people put it out there and they feel good they did something, but we can't measure the success or we measure it and it has no effect.”


Financial wellness programs offered through the workplace can take a variety of forms.

Take, for example, Student Loan Genius, which specializes in the reduction of student debt; or EverFi, a financial literacy-focused platform that provides digital education modules; or Financial Finesse, which allows for holistic, custom-built programs around topics such as budgeting, tax and estate planning.

Fifty-five percent of employers already offer help in at least one category of financial well-being (debt management, budgeting and financial planning, for example) and 38% have at least three covered, according to a January 2016 survey of large employers by Aon Hewitt.

The percentages were expected to swell to 77% and 52%, respectively, by the end of the year.

The trend has staying power, according to advisers and analysts, who said it's trickling down to smaller employers as well.

Many providers have cropped up in the past five years to meet the demand, according to Patrick Delaney, vice president of retirement marketing at T. Rowe Price, which has developed resources to help advisers evaluate programs. As such, it's a “very complex” area for plan sponsors to navigate, making it fertile ground for advisers to show value, he said.


“If people asked advisers two years ago, they'd say clients weren't asking about [financial wellness], and now it's showing up in [requests for proposal] and eventually it will end up in every box of cereal,” said William Chetney, founder of Global Retirement Partners, a firm made up of independent retirement advisory practices with an aggregate $200 billion in assets.

Mr. Chetney, the former president of LPL Financial Retirement Partners, as well as Barbara Delaney, founder and principal of StoneStreet Advisor Group, believe the best financial wellness programs are the ones allowing 401(k) advisers and their clients to gauge effectiveness over time.

“It's not a one and done program,” Ms. Delaney said. “It has to be a consistent program that's measurable over time.”

Ms. Delaney, for example, uses the Financial Finesse program with clients. There's an initial, anonymous wellness assessment for employees, which Ms. Delaney ties to the open-enrollment period for company benefits. The assessment shows individuals their particular focus areas, and demonstrates to employers vulnerabilities across their employee population, she said.

Advisers are then able to provide workshops, which supplement online resources, based on the largest areas of need. An assessment the following year shows areas in which there's been improvement and those where more guidance may be necessary.

Employee engagement with a wellness program is “half the challenge,” so advisers can suggest employers use an incentive, such as free gift cards, to encourage participation, Ms. Delaney said.

She has one client who, for example, gave a $350 credit toward the next year's health insurance for taking the online wellness assessment and attending an on-site workshop. Some companies even turn off employees' e-mail for 15 minutes during the day so they can complete an assessment, according to Mr. Chetney.

“Changing behavior, it takes time,” Mr. Chetney said.

Some believe financial education and literacy programs aren't the answer to creating a meaningful alteration in behavior among employees.

“Financial advisers, I think, have some belief if they can educate their clients about their finances, this will lead to behavior change. And we haven't found that to be true,” said Kristen Berman, a behavioral economist who co-founded Duke University's Common Cents Lab, which partners with financial technology companies such as Digit and Gusto to promote better investor savings behavior.

One academic paper, for example, finds open-ended financial education and literacy programs, without any sort of measurement, have a positive effect on financial behavior 0.1% of the time.

Common Cents Lab is currently partnering with the financial-wellness platform Retiremap, which is launching a new version of its service in January bundling in the concepts of accountability, goal-setting and confidence-building to nudge employees' behavior change, Ms. Berman said.

However, there are different schools of thought, T. Rowe's Mr. Delaney said, pointing to those who believe more education leads to better engagement, which in turn leads to positive action.


“There's not a right or wrong there,” he said, but conceded “data reporting capabilities are important, because that's the only way you'll be able to measure success.”

And, the chief financial officer of an organization will likely want that sort of metric, Mr. Delaney said.

However, those reporting capabilities come with a heftier price tag, he added.

Ultimately, selecting the right financial-wellness provider requires an evaluation of several factors, Mr. Delaney said, such as: a client's budget and employee demographics; the service provider's business model, data reporting capabilities and focus (is it one category or more holistic?); and how the service will be paid for (by employees or the employer?).

“I have heard recently some adviser shops are footing the bill on behalf of their clients, because they're getting referrals for it and getting ancillary business coming through the door,” Mr. Delaney said.


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