Gauging value of financial wellness plans a struggle

Financial wellness programs are growing in popularity, but measuring their value and getting employees to participate remain major challenges.A Prudential Financial Inc. survey of 777 employers in 2017 found 83% of employers offered some sort of financial wellness program, up from 20% in 2015.

Such programs run the gamut from help with student loan repayments to establishing an emergency fund and budgeting, all with the goal of reducing employees' financial stress and bolstering workplace productivity.

The impact of employees' financial stress on their productivity cannot be ignored, sources said. A 2017 survey of more than 1,500 employees found that 30% of employees said they are distracted by their finances at work.

In the same survey report, PricewaterhouseCoopers estimated that a company with 10,000 employees could lose $3.3 million a year from such distracted workers.

But while the number of workplace financial wellness initiatives is growing, measuring their value remains tough.

In a Bank of America Merrill Lynch survey of 667 401(k) plan sponsors, 70% of respondents that offered financial wellness programs in 2017 said they lacked formal measurements to assess their value. Determining the value is difficult, industry experts said, for a number of reasons. Those include the subjective nature of some data; the infancy of some financial wellness programs; the lack of a common formula to measure value; and the effect of outside factors, such as the economy and company health. The latter, in particular, can influence employee behaviors and skew results.

Lori Lucas, president and CEO of the Employee Benefit Research Institute, Washington, said EBRI officials have heard from plan executives that in order to get the money to implement financial wellness programs they need to demonstrate a return on investment to upper management. Among the results management is looking for: improved retirement readiness, lower turnover, higher employee satisfaction and greater workforce productivity.

"There are a lot of interrelated issues and interrelated influences on employee behavior," which make something like the return on investment hard to pin down, said Shane Bartling, San Francisco-based senior director, retirement, at Willis Towers Watson PLC. It's difficult to say that an effort that was undertaken in the financial wellness space is the sole reason employees are acting a certain way, he said.

While "there are too many influences to precisely pin down ROI in a hard and fast way," some Willis Towers Watson clients have taken the step of estimating the ROI from broad-based wellness programs, considering, for instance, what financial stress could be costing their companies in terms of performance, Mr. Bartling said.

He declined to identify the clients.

A reduction in health costs and absenteeism are other results employers seek from financial wellness programs, Mr. Bartling said. While success in those areas can take time to materialize, there are a number of near-term measurements employers can take to understand if their financial wellness programs are on track to deliver value and be successful, sources said.

Mark Singer, Boston-based president and founder of Financial Literacy Toolbox, said the financial wellness company completed a five-week pilot program in October with 10 employers where it looked for changes in employees' self-reported financial stress levels and retirement plan contributions.

Program participation levels, employee feedback, changes in health savings account contributions, loans and withdrawal levels from defined contribution plans are other near-term types of information employers should look to capture, Mr. Bartling said. "Those are ways to measure value on investment. It doesn't directly speak to return on investment, but it definitely shows how the workforce is deriving value from that effort," he said. "Seeing those sorts of both hard objective data points as well as subjective feedback can you give a good sense for (whether) this service is worth the investment and worth the time."

Looking past aggregated metrics to see how different segments of the workforce are responding to financial wellness initiatives is critical, Mr. Bartling added.

"Statistics that measure usage, participation and behavior in the aggregate can easily miss the fact that usage by the most at risk, the ones that need the help the most or want the most help ... may not be engaging in the solution," he said.

Mr. Singer said results from a 2017 survey by Aon Hewitt indicate employers aren't just thinking about the bottom line when offering their financial wellness programs.

In the survey of roughly 250 employers, the most common reason employers cited for offering financial wellness programs was they thought it was "the right thing to do." A desire to increase employee engagement and improve retirement statistics were the next most frequently cited responses.

Getting employees to engage with financial wellness resources also remains a challenge.

The Bank of America Merrill Lynch survey — which also examined the attitudes of 657 401(k) participants — found that although 48% of employees had access to workplace financial wellness programs in 2017, only 31% of employees participated. Reasons for not participating included limited time and a lack of interest in the services offered.

"The more I talk to plan sponsors, the more I find ... they are so frustrated" with getting employees engaged, Mr. Singer said.

One thing preventing some employees from using financial wellness resources, Mr. Singer believes, is an unwillingness to acknowledge their financial position. "If I'm having issues, do I really want to be faced squarely with them?" Mr. Singer asked. "People don't want to know the negative. They don't want to see it right in front of them. Some don't even know they have a problem."

To build a financial wellness programs that gains traction, Mr. Singer recommended starting with the employees who say they want help.

"Instead of trying to push this out to everybody, our approach is to do a pilot program with each organization and to only find ... that 10% of the population that really wants to engage with the program, turn them into champions, and have them help management gain more traction over time to push forward the message of financial wellness," Mr. Singer said.

Scoring on financial health could discourage the most challenged employees from participating, Mr. Bartling said.

"Raise my awareness, give me a baseline and let me know me where I stand, but don't tell me I'm red," he said.

Personalize the user experience as much as possible, said Carla Dearing, Louisville, Ky.-based CEO and founder of Sum180, a mobile and online financial wellness company. In general, "most people are not very interested in money. They don't want to spend a lot of time on it. They don't want to talk about it, but they are pretty interested in their own money," Ms. Dearling said.

Financial wellness programs should not be confused with financial literacy programs, which are purely educational in nature, EBRI's Ms. Lucas noted. Financial literacy programs have been around longer, and the research on whether they move the dial has been inconclusive, she said.

The theory around financial literacy programs is that when people are better educated about their finances, they will behave in better ways — for instance, save more or make better investments, Ms. Lucas said.

Financial wellness programs, on the other hand, try to "move the dial by interventions that aren't necessarily educational" — for instance a student loan repayment program that aids people in repaying their loans, she said.