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October 11, 2013 at 10:42 AM
As financial planning students look around for career opportunities, Financial Finesse suggests a slightly different track is presenting itself.
The firm hosted a webinar on Thursday that described financial wellness as a potential career path for advisors.
“The term ‘financial wellness’ has developed from a terminology into a whole industry,” Diane Winland, senior resident financial planner for Financial Finesse, said on the call. “Not only is it changing the way financial planners approach a relationship, it’s changing the way planners work.”
Financial Finesse found venture capital firms have invested more than $70 million in financial wellness startups over the past couple of years, Winland said.
Financial wellness programs are growing among employers, too. Winland referred to 2013 research from Aon Hewitt that found 80% of employers plan to implement or expand a financial wellness program within the next year.
Liz Davidson, CEO and founder of Financial Finesse, said more than 90% of inquiries from companies interested in the firm’s services are about wellness programs. She pointed out, though, that the term is still loosely defined. “What you see is such a broad spectrum of firms with different services that are folding them under the financial wellness umbrella.”
This creates a spectrum of firms that on one end are applying behavioral finance principles and truly acting as financial wellness firms, and on the other are simply selling products or services and calling it financial wellness “because they know the term resonates,” she said.
True financial wellness, Davidson said, “is a state of financial well-being where the person is not suffering financial stress. They have their finances under control. They have their debt under control or eliminated. They have their emergency saving, and they are proactively saving for future goals and are on track. That is financial wellness.”
Davidson described the evolution of the industry: “Two generations ago, there wasn’t really much of a financial planning industry. There was a brokerage industry. It did not look at a person’s overall needs. About 30 to 35 years ago, financial planning as an industry was born. The CFP Board was established, there was a certification process for financial planners that was much more holistic and looked at investing based on the individuals goals. However, the catch is that you need to have a lot of investable assets in most cases. The planners need to feed their families, and many middle-income employees may not have enough investable assets to be worth their time. With fee-only planners, it’s hard to get people who are struggling financially to pay for financial services precisely because they’re struggling financially.”
Financial wellness is “complementary” to financial planning, Davidson said, but there are differences. “Financial wellness is a holistic approach that starts with the participant and works backwards, she said. “I know one-on-one financial planning does that as well, but in a workshop format the traditional model has been a very didactic approach as opposed to engaging the employee and working with them to reach their goals.”
