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Financial Planning > Behavioral Finance

2015 outlook: Why financial wellness is the next big trend

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Worksite wellness has been a significant theme throughout 2014, particularly focused on health wellness and the extended benefits of a healthy workforce. As we look toward 2015, we can anticipate the wellness movement to continue through the expansion of financial wellness, a component of the movement specifically focused on helping individuals ease economic stress, overcome money challenges and promote financial health.

With financial stress cited as a common workplace distraction, a financially-focused wellness initiative will become a higher priority among businesses and human resource teams moving forward. For your business owner clients, adding a financial wellness component to their retirement plan fully optimizes the benefit for both employer and employees. Employers should give strong consideration to how health and financial wellness initiatives work together to create an advantage for employees – and their bottom line – when evaluating their benefits packages.

As the advisor, recognizing the financial wellness trend now can give you a head start on anticipating your client needs. As you map out what to include in retirement plans for 2015, here are three reasons why you should give financial wellness a closer look.

Employers want to see participation and you are responsible for driving it

Typically, 401(k) plan participants fall into two categories: involved and uninvolved. Involved investors comprise 15 percent of participants, who are considered sophisticated and prefer a “do-it-yourself” approach. They retain personal financial advisors to walk them through the 401(k) process and educate them about their investments. The majority of investors, however – those 85 percent – are often uninformed about their investments, making it difficult to make their own decisions, and they do not have direct access to an advisor or coach.

Still, it cannot be overlooked that those 85 percent make a big difference in plan participation numbers. Participation is important for employees’ retirement readiness, but more importantly for the business owner – your direct client – who has a vested interest in proper saving habits. Morningstar data found when employees are not saving enough, the delayed retirement costs as much as $50,000 per employee, creating quite the expense for your client. Advisors must recognize the connection between awareness and action and encouraging financial wellness initiatives helps bridge that gap.

Financial wellness works on both sides of their balance sheet (and yours)

When your business owner clients discuss the design of their benefits packages with you, you understand they are looking to create the best benefit for their most valuable asset: their employees. Financial wellness makes a notable difference in how employees’ benefits are structured, and offers unique advantages to both the business owner and their employees.

Research has proven that financial wellness yields similar benefits to those from a medical-based wellness program. As such, your client can enjoy reduced long-term healthcare costs, higher efficiency, longer tenure and decreased absenteeism among their staff.

Further, financial wellness reduces financial stress among employees. The Family Firm Institute (FFI) 2012 Research Year in Review identified money as the biggest stressor for employees, with work and the economy as additional contributors. As your client benefits from staff being more productive and healthy, their employees benefit too. When employees are less financially stressed, they are generally happier at work.

By introducing and offering a solution on financial wellness, you are bringing an additional, value-add service at minimal or no cost to you. Providing the best-in-class service offerings that creates tangible solutions both establishes your value while supporting your business objectives and growth.

Financial wellness is a true employee benefit, keeping the employee as the focus

As with any employee benefit, business owners are seeking to help their staff and in some cases gain a competitive edge. Financial wellness focuses on the individual, with the biggest benefit being education and an emphasis on the whole financial picture. Financial wellness programs educate employees beyond their 401(k) plan by offering guidance on other financial issues likely concerning them, such as budgeting, debt, estate planning, long-term care and taxes. 

Notably, despite the clear benefits, most employees – especially the 85 percent that is uninvolved in their plan – are not willing to pay an additional cost to opt in to a wellness program, which is important to keep in mind when making a financial wellness recommendation. However, there are available options to add a financial wellness component in a cost-effective manner, specifically through a 401(k).

As workplace wellness initiatives continue to expand, is it prudent of employers – and their advisors – to include financial wellness. The introduction of financial wellness as a component of retirement plans allows advisors the opportunity to be part of the solution. Knowing that your business owner clients are going to begin seeking financially-focused benefit solutions, it is important to educate yourself on the possibilities of financial wellness now. It is your responsibility to present the latest, cutting edge 401(k) plan offerings to your clients, and financial wellness is going to be that trend for 2015.  


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