Bad news for advisers offering financial wellness programs

They're at a competitive disadvantage relative to 401(k) vendors, health-plan providers and others, according to a new report

Oct 9, 2019 @ 3:52 pm

By Greg Iacurci

There's bad news for financial advisers offering financial wellness services to employers and their workers: Advisers are at a competitive disadvantage to other vendors, like 401(k) providers and health insurers.

That largely stems from positioning — employers don't perceive advisers as the best source to deliver financial wellness to employees, and advisers lack the rapport with key decision-makers at companies, according to a report published Wednesday by consulting firm Aite Group.

"Financial advisers should be the go-to person for this — they're well-educated, this is their happy playground," said Inci Kaya, lead analyst for health and financial wellness at Aite Group. "It is surprising that employers don't necessarily think about the financial advisers when it comes to this."

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Financial wellness is a broad and loosely defined concept in the financial services industry. Generally, the term refers to products and services meant to improve consumers' financial well-being.

Employers, especially large corporations, are increasingly adopting programs to help workers manage their personal finances, as wages have stagnated over the past half-century and the costs of retirement, health care and college education have soared, according to Aite's analysis. Employers have embraced an employee-benefits approach to address the issue likely because benefits are easier to scale back than salaries.

Over a third of the 303 employers surveyed offer financial wellness benefits to employees, and a quarter are considering offering them.

Financial advisers, especially those who consult with employers and employees around 401(k) benefits, have looked to build out such services to diversify their revenue streams and capitalize on workplace demand. Employees also represent a captive audience to which advisers can sell wealth management services.

However, offering financial wellness services may prove difficult for many advisers who haven't cultivated the right relationships with the correct company decision-makers.

The majority of decisions around financial wellness at large and midsize firms with more than 100 employees are made by human resources vice presidents, directors and managers, or employee benefits managers, directors and vice presidents. At companies that have between 1,000 and 5,000 employees, for example, these stakeholders make buying decisions about financial wellness 68% of the time, according to Aite.

"That's not where their warmest relationships lie," Ms. Kaya said of financial advisers, who often try to cultivate a rapport with executives like CEOs, CFOs and company owners. "Advisers come to mind less regularly [as a result]."

Employers view 401(k) providers such as Fidelity Investment and Bank of America and health insurers such as Cigna more favorably, she added. Like 401(k) advisers, retirement-plan record keepers have been debuting financial wellness services.

Further, when it comes to the delivery of financial education to workers, employers would turn to 401(k) vendors, health plan vendors and health savings account providers before they consider financial advisers.

Nearly 40% of employers believe 401(k) vendors are best equipped to deliver training for financial wellness, followed by 19% for health plans, 13% for HSA providers, and 12% for investment managers and financial advisers, according to Aite.

"For financial institutions that live and breathe finance, financial tools, and saving and investment products, this is a highly disappointing outcome," the report said. "It indicates that there is generous headroom for improvement particularly around building trust and relationships, and communicating in a personalized manner with content that is relevant to each customer based on their phase in life."

However, there is ample opportunity for advisers.

"The number of companies employers turn to is varied and very fragmented," Ms. Kaya said. "You have front-runners, but the market is really open for grabs."

The smaller-employer segment is one area where advisers may find success. That's because decision-making is more consolidated in the hands of company executives.

For example, at companies with fewer than 100 workers, CEOs, presidents, CFOs and owners make decisions about financial wellness 58% of the time.

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