Financial wellness to top employer priorities in 2023

Financial wellness programs will be a top priority for employers in 2023 as workers struggle with rising prices and brace for a possible recession, many retirement plan advisers believe.

"Right now our conversations are much less about whether or not populations are on track for retirement and more about understanding how the populations are reacting to all the various challenges that are happening in the economy," said Joe DeBello, a vice president in the retirement and wealth division of OneDigital Investment Advisors in St. Petersburg, Fla.

Employees are worried about the rising cost of everything from orange juice to home heating fuel. "They're thinking about how they're going to put food on the table," Mr. DeBello said. "That's the real stuff that people are dealing with."

With inflation on the rise, credit card debt at an all-time high and personal savings at an all-time low, Mr. DeBello and other retirement plan advisers report a strong increase in employer demand for financial wellness programs, a trend they see continuing in 2023 as employers look for services to help their workforces navigate today's rough economic waters.

"I think employers are seeing headwinds for participants with inflation and rising interest rates and just more of a struggle for participants day to day," said Julie Braun, a financial adviser and corporate retirement director at Morgan Stanley in Colchester, Vt. "That's sparking more of the discussion of wellness that we weren't really seeing before."

Emily Wrightson, a principal at CAPTRUST Financial Advisors LLC in New York, is among the advisers reporting a surge in interest in financial wellness programs with many clients implementing the programs — or considering them — this year. "We have seen more than 30% year-over-year growth in new client onboardings, and we expect this trend to continue into 2023," she said, referring to the firm's financial wellness and advice offering.

In 2021, more than 1 in 4 employers (27%) offered a comprehensive financial wellness program beyond a standard 401(k) education program, up from 26% in 2020, according to Plan Sponsor Council of America's latest annual survey of profit-sharing and 401(k) plans. Nearly 5% added a financial wellness program in 2021, with another 4.4% saying they were planning to implement one in 2022.

The demand for financial wellness programs among employers, however, is not entirely altruistic. Employers want to minimize the impact of financial stress on the productivity of their workforces, according to retirement plan advisers.

"Financial stress has been shown to really impact how many days off people take and how well they do their jobs," Ms. Wrightson said.

In a study of more than 3,200 full-time employees conducted by PricewaterhouseCoopers in January and February of 2022, for example, 18% said that worries over money had a major impact on their productivity at work and 15% said it had an impact on their attendance.

Employer demand for financial wellness programs is also driven by the need to have strong benefit packages in a competitive labor market, according to advisers.

"Clients are struggling with trying to attract and retain talent," Ms. Braun said. "With the tight job market, they really have to be more competitive with these financial solutions for their participants."

In the battle for talent, financial wellness programs are a much cheaper option for employers than making expensive design changes to their retirement plans, such as increasing their matches, a big consideration for employers as they ponder the prospect of a recession and slower growth, according to advisers.

"Wellness is something that they can easily add without a lot of cost at all," Ms. Braun said.

Ms. Braun explained that there are a number of options for financial wellness solutions that range in price, with some offered as add-in packages that do not cost extra. Many record keepers, for example, provide financial wellness services, such as websites with videos and articles on budgeting, credit, spending and other topics, at little or no extra cost, she said.

CAPTRUST's Ms. Wrightson agreed that financial wellness programs are an added benefit that is "not super expensive," saying they can make a difference in recruiting, especially if the programs are robust.

If the program provides educational tools and resources as well as access to independent financial advisers, it can be "a really big draw," Ms. Wrightson said.

"To go out and get a financial adviser can cost $1,200," she said. "If you could offer that as part of a benefit, it could be a nice solution for people, especially when they're having anxiety or seeing their investments fluctuate," she said.

Financial advisers can help employees with everything from budgeting and credit card debt management to retirement planning, strategies for claiming Social Security and overall financial planning, she said.

"It could be broad questions around their financial well-being or it could be a strategy for saving and investing in the company's retirement plan and more complex conversations," Ms. Wrightson said.

In a bid to be more competitive, some employers are offering employees financial planning services, which can be particularly valuable for pre-retirees — those 10 to 15 years from retirement, OneDigital's Mr. DeBello said. For employees entering the "retirement red zone," having a financial plan can help "lower their anxiety," he said.

Ken Barnes, senior investment consultant at SageView Advisory Group LLC in Richmond, Va., has seen some of his plan sponsor clients implement executive-level financial planning for their senior executives, a perk that he says made their benefit package more competitive.

One client offered each executive $2,000 to use on financial planning or investment management, while others provided their executives with a company-paid benefit for financial planning, estate planning, and tax planning and filing, he said.

Apart from financial wellness programs, plan sponsors are getting more creative with their retirement and other benefits to stand out from their rivals, a trend that retirement plan advisers expect will accelerate in 2023.

"Our HR representatives are taking a really holistic view on how they allocate their benefits budget," Mr. Barnes said.

Some employers, for example, are looking at the health savings accounts they offer their employees, with one opting to increase the HSA contribution instead of increasing their retirement plan match because it thought the HSA was more valued by employees, Mr. Barnes said.

Other employers are expanding ancillary benefits by offering perks such as student loan repayment counseling, pet insurance, legal services and will preparation, he said.

As OneDigital's Mr. DeBello sees it, plan sponsors have little choice but to get creative. With employers unwilling to "throw money" at bigger matches to address what Mr. DeBello views as a persistent labor shortage that is unlikely to go away, plan sponsors will need to think outside the box.

Younger workers, for instance, might appreciate discounts off of their Netflix subscriptions, a benefit that one of his clients recently offered.

"Younger folks coming into the workforce aren't thinking about benefits the same way we have in the past," he said, adding that employers need to build perks around the "everyday items that most Americans have as an expense."

Employers increasingly are searching for ways to help workers reduce "regular day-to-day costs," Mr. DeBello said.

"That's what plan sponsors are asking us for," he said.