Programs gain traction, but not all sold

Financial wellness programs are gaining momentum despite difficulty in measuring the return on investment and lingering reservations among some plan sponsors about their value, according to industry observers.

"Financial wellness has become the No. 1 focus of employers," said Alison Borland, executive vice president of wealth solutions and strategy at Alight Solutions in San Francisco.

Ms. Borland cited "huge positive trends" in the growth of financial wellness programs, saying that the percentage of plan sponsors looking to create or expand their programs more than doubled in the last five years. Nearly two-thirds of employers (64%) say they are very likely to launch programs or focus on the ones they have, up from 30% in 2014, Ms. Borland said, referencing a 2018 Alight survey of 171 plan sponsors.

Financial wellness programs vary widely in size and scope and tackle issues that range from basic budgeting to debt management and retirement planning. But their overall goals are the same: They all aim to increase the financial wellbeing of employees in the hope that better financial health will lower employee stress levels. While some employers would like to see higher levels of financial wellness translate into lower absenteeism, higher productivity and ultimately greater financial returns — links that so far have eluded researchers — most plan sponsors are implementing the programs simply because they think it's the right thing to do, according to industry observers.

In fact, the heightened interest is driven in large part by concerns over retirement plan leakage through participant loans, hardship withdrawals and cashouts when workers change jobs, according to Ms. Borland. "Leakage in 401(k) plans is a symptom of broader financial distress, and companies and plan sponsors started realizing more and more that you can't solve the leakage issue if you don't try to solve the underlying root cause," Ms. Borland said.

That, combined with a growing belief among plan sponsors that they can talk to employees about matters beyond 401(k) savings, led to a "strong trend of employers being not just willing to but committed to implementing financial wellness programs for their employees," she said.

Still, plan sponsors continue to have doubts. As much as they want to do the right thing, some nevertheless question the return on their investment, saying that it's hard to quantify supposed improvements in employee productivity resulting from greater financial well-being.

"There's not as direct of an ROI for the money spent. From a quantifiable perspective, it's not easy," Ms. Borland said.

Shane Bartling, senior director of retirement at Willis Towers Watson PLC in San Francisco, agreed. "It's extremely difficult to show precise ROI metrics simply because well-being is so difficult to isolate, especially financial well-being," he said.

Efforts to use measures such as employee absenteeism and health-care costs to determine the ROI for financial wellness programs have been tricky because those measures can't be squarely pinned on just financial well-being programs, Ms. Borland and other observers explained. All researchers have been able to show are correlations — not causal links — between overall financial and physical well-being and business performance, industry analysts said.

Plan sponsors are also troubled by potential conflicts of interest, worrying that record keepers and other providers may have ulterior motives for offering financial wellness programs. "They may be trying to sell something. They may be trying to provide broader advice outside of what the employer has asked them to do," Ms. Borland said.

The "continuing flood of new vendors in the financial well-being space" is also slowing plan sponsors' pace of acceptance, Mr. Bartling added. "It's difficult for employers to discern which of these vendors are going to be appreciated and used by a meaningful portion of the workforce," he said.

Skepticism aside, plan sponsors are nevertheless moving forward with financial wellness initiatives with many sponsors integrating them under their overall health and physical well-being programs. "There is a growing sentiment that employers of choice need to offer a compelling financial well-being offering," Mr. Bartling said. "I think employers are feeling more pressure to elevate the quality of the programs they have because it's becoming more of an expectation of the workforce."

Some employers are further along than others in creating and executing their financial well-being strategies, with some "testing the waters" as they pull in different providers for services such as assistance with student loans and emergency savings, according to Ms. Borland. "Some of them are still trying to figure out their strategy ... and some are leading the way with strategies and solutions already in place," she said.

About half (53%) of employers are in the process of creating their strategies, 27% are in the process on executing on their strategies and 8% have fully executed them, according to Alight data. Twelve percent, however, said they do not intend to create a strategy.

Overall, though, the programs tend to be more common among larger employers, Prudential Financial Inc. found in a 2019 survey of 2,000 employees with access to health wellness benefits through their employer. Forty-eight percent of workers at large companies (25,000 or more employees) said their employers offer financial wellness benefits, while only 37% of those at small companies (fewer than 100 employees) said the same, according to Prudential's survey.

One of the trends among sponsors is that more are providing one-on-one financial advisory services and using games to encourage employees to learn how to better manage money. More than half (51.9%) of plan sponsors today offer one-on-one advisory services to participants, up from 42.9% in 2016, according to Callan LLC.

"It's always beneficial to give participants access to individualized guidance and advice whenever possible," said Dan Cook, a former research analyst at Cerulli's retirement practice in Boston who recently left the firm in July to pursue an MBA.

"Employers are saying that they find these high-touch solutions very important as part of their financial wellness programs," said Lori Lucas, the Washington-based president and CEO of the Employee Benefit Research Institute. Employers are realizing the importance of having financial advisers available to the workforce because employees needing help with things like budgeting often require someone "sitting down with them and going through their personal situation," she said.

Plan sponsors are also getting more adept at analyzing participant data to give participants what in the industry is being described as a "hyper personalized" experience, according to industry analysts. Participants might, for example, log into their websites or mobile apps and see specific messages around how they should be investing or they might be reminded that they aren't saving up to the company match. It "enables an entirely new level of help and guidance that is much more relevant and specific to the individuals than what we've seen historically," Ms. Borland said.

Mr. Cook echoed similar views, saying that financial wellness providers that collect and leverage data and come up with tailored messaging that is action-oriented are "going to be those that are able to realize success when it comes to administering financial wellness programs."

"Participant data is really what fuels the engine of financial wellness," Mr. Cook said.

Ms. Lucas echoed similar views, saying that the majority of plan sponsors — 63% according to EBRI's research — are using employee benefit and retirement plan data to understand the needs of their employees. Some are even going outside the box. One plan sponsor, for example, partnered with a credit union to get anonymized data about their workers' credit scores to see to what extent employees were having serious financial problems.

This way, Ms. Lucas said, the employer could "help them by providing tools that they could use to budget better and manage their debt load better."