How convergence can help increase revenue

Convergence, the alignment between retirement, individual wealth management and health care has never been more obvious and critical. More than ever, all the expertise necessary to guide clients in these areas resides within the same benefit consulting organizations. This has happened through organic growth, or more likely through private equity firms backing acquisitions.

I reached out to one of the early adopting firms to better understand how it has shaped their practice.

“We realized that to create retirement readiness and positive financial outcomes for employees, we needed to help employees with more than just their retirement savings,” Kameron Jones, assistant vice president at NFP Retirement, said in an email. “Consider the employee who is buried in student loan and credit card debt, while trying to afford living in an expensive area. Helping them become a long-term saver is difficult if we don’t first put a plan in place to help them overcome their present financial challenges.” 

That is also true for other workplace benefits, he said.

“With health care costs increasing and taking a larger portion of an employee’s paycheck each year, there is less to spend on benefits and retirement,” he said. “We’re finding employees often need help navigating all of their employer benefits and understanding how they fit into an overall financial plan.”

One of the top trends in financial wellness is the use of data analytics to personalize financial planning. We have seen this both in the development of tools by retirement plan record keepers as well as firms like NFP and affiliate RPAG that have created their own financial wellness platform, which includes health care navigation. How much should go to an employee’s health savings account, defined-contribution plan, voluntary protection solutions or pure wealth accumulation?

The impact has been positive. Advisers have a more holistic financial view, using real data. The employee is more appreciative of their workplace benefits. And an employer can customize their total reward program to meet the needs of their diverse workforce.

Convergence can help solve the savings gaps for employees, while also creating revenue opportunities.

“With a recent client … we found many employees had medical debt and that the deductible from the high deductible health plan was $6,000, higher than it should be. This allowed us to introduce our benefits teams who educated the client on hospital indemnity insurance, which is an effective tool to help employees pay for hospital costs that fall outside the HDHP coverage,” Jones said. “The implementation of this plan is now empowering employees to be better prepared for unexpected medical costs, while protecting their retirement assets from being the only option for covering emergency costs. We’ll be measuring the impact on loan and hardship distributions taken from the plan and expect to see positive results.”

As much as an RPA looks to solve the savings gap for low- to mid-income earners, they also need to deliver ways for employers to help their higher income earners, many of those in the C-Suite, who have a much larger income replacement gap to close.

“What we often find is that group plans – life and disability in particular – fall short of providing the necessary protection higher income earners need to replace a desired amount of income in retirement,” Jones said. “By identifying the gap in retirement and insurance in the same conversation, we’re able to pivot to a conversation about all their benefits and run projections on carve-out plans.”

Make no mistake, retirement and health care are converging at the workplace. Employers are seeking out advisers that can help to create a more productive and appreciative workforce. Those advisers and firms having the health and wealth conversation have already experienced increases in revenue and client retention rates.

You do not have to be a benefits expert. But you must be willing to familiarize yourself with the interplay between benefits and seek out specialists to help create a cohesive strategy and solution set. 

Francesca Messano is a managing director at Innovu, a firm that works with advisers and employers to identify health care savings.