Financial Wellness Programs Should Focus on Budgets and Behaviors

Financial wellness programs are widely available and have been adopted by a majority of retirement plan sponsors.  Still, usage of these programs is low among participants and financial stress—at its highest level since the Great Depression—continues to plague many Americans.  Credit card debt is also at a record high, surpassing $1 trillion, with an average individual consumer balance of $7,951.

Recent research from Cerulli, cited by InvestmentNews, found that more than 90% of defined contribution plan recordkeepers offer financial wellness programs, and 71% of plan sponsors have implemented such programs.  However, fewer than 20% of participants use financial wellness resources and tools available to them, Cerulli found.  Among those who do use financial wellness tools, 41% found them helpful, while 57% remained neutral about their effectiveness.

Participants’ lack of enthusiasm for financial wellness opportunities likely won’t sit well with plan sponsors who have invested time and money to implement them.  One potential way to boost participant engagement with financial wellness programs is to “give them a makeover,” as experts quoted in both InvestmentNews and a recent Employee Benefit News article (linked above) put it.

Financial stress is an emotional and behavioral problem, not a money management problem.  So, in addition to focusing on budgeting, personal finance, cash flow, and retirement savings strategies, financial wellness programs should approach consumers holistically.  In other words, these programs need to go beyond budgeting 101 to account for and address the emotional and behavioral decisions that influence money decisions.  Without focusing on why money makes people think, act, and behave the way they do, financial wellness programs will continue to fail to address the core reasons why so many Americans continue to grapple with financial stress.

One way to redefine financial wellness programs is by offering access to one-on-one financial advice and coaching.  Many people don’t know where to start when it comes to addressing their spending and money management behaviors, so it can be beneficial to have a money coach, or a financial professional deliver a more personalized, “hands-on” approach to help individuals make more informed, confident decisions about their finances and the behaviors and emotions that drive them.

In addition to improving employee engagement, satisfaction, and productivity, helping Americans get a better handle on their finances has positive implications for recordkeepers and financial professionals as well.  According to Cerulli analyst Elizabeth Chiffer, “’Effective financial wellness programs can offer return on investment for recordkeepers by bringing in richer participant data, building potential retail relationships, and winning and retaining plan sponsor clients.’”