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Financial Wellness Paves New Career Track for Advisors

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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.”

Another distinction is that financial wellness programs are “most typically paid for by the employer or by a company that is bringing it to the employer as part of their service offering. Employee does not pay for the service at all so those lower-income and middle-income employees who do need that guidance get it as an employee benefit.” Davidson noted this model is the most pervasive and most likely to continue.

Finally, “It’s truly unbiased, meaning that the financial wellness companies aren’t selling any financial products or services. They’re not managing assets. They’re not affiliated with firms that do or referring employees to individual financial planners. They are simply working with employees to help them improve their financial situation so that they ultimately amass those investable assets and can work with a planner to invest those assets effectively.”

Davidson stressed that successful financial wellness programs need to focus on underlying behavioral finance principles to change long-term behaviors. “It really is getting employees addicted to positive financial habits and behaviors the same way that so many of us are addicted to consumption. It’s setting up a system that gets them addicted to small wins and seeing their credit card balances go down and seeing their savings account balances go up.”

Davidson said advisors can help clients create this addiction if they focus on the principles of behavioral finance and what makes people develop positive habits instead of negative habits.

“It’s really a lifestyle choice,” Davidson said. “It’s a process, not an event.”

Barbara Delaney, an advisor to defined contribution and defined benefit plans, said more traditional methods of educating participants — seminars, workshops — have been ineffective. “What we’ve heard from plan sponsors is that they want this type of planning. If they’re going to do these meetings, they want them to be meaningful.”

Delaney’s firm is integrating financial wellness into all of its communications with plan participants. “It’s been really successful so far and clients really enjoy having a more holistic view of not only 401(k) plans, which can get quite boring, honestly; it’s more engaging for participants.”

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