Financial Fitness Is Goal of Plan Sponsors

October 11, 2013 ( – Financial wellness is garnering more attention from plan sponsors, according to speakers at a webinar by Financial Finesse, a provider of financial education services.

The term is being used more and more, said Liz Davidson, chief executive and founder of Financial Finesse. “From 2010 to 2012, there has been a significant increase in inquiries from companies interested in these programs and using the term ‘financial wellness.’ According to an Aon Hewit survey, a growing majority of employers (80%) said they plan to implement such programs or implement financial wellness programs. (See “Employers Making Retirement Readiness a Top Priority.”)

As more people realize savings is the most important part of achieving retirement security, Davidson said, financial wellness can help employees develop the habits that will help them do this. The financial wellness industry is experiencing triple-digit growth, she said, “because employee retirement preparedness is not where it needs to be.”

At the same time, Davidson pointed out, “companies increasingly realize it is damaging to the employer if an employee cannot retire. The stress caused by financial problems—including health care costs—make preventive measures a key component.”

For every year a worker delays retirement, the cost to the plan sponsor is $10,000. Financial Fitness forecast numbers as amounting to some $480,000, for a company with 20 pre-retirees. Using the standard figure of 80% to calculate those who are unprepared, that would mean 16 employees delay retirement. If they work just three years longer ($30,000 per employee) the amount in terms of additional health care costs and other factors could be staggering.

Effective programs and providers use the principles of behavioral finance, Davidson said, and services are not linked to selling specific investment products or managing assets, but instead focus on the behaviors and habits that participants can learn to achieve savings and financial goals.

“Financial education is a process, but financial wellness is a lifestyle choice,” Davidson said, “a result that will impact financial security.” When financial wellness is achieved, a person can eliminate financial stress by having control of their finances, accumulating emergency savings, and proactively saving or actually achieving their goals. “Debt is eliminated or being controlled,” Davidson said.

According to Barbara Delaney, principal at Stone Street Equity, plan sponsors want this type of planning for their participants, and the work seminars they have been providing are ineffective. Delaney has added financial wellness seminars to her practice.

Participant finances need to be seen holistically, making financial wellness programs critical. “Our world is changing,” Delaney told PLANSPONSOR. It’s no longer enough to look at someone’s 401(k) balance in isolation. Participants wake up and have a number of things on their minds besides their retirement plans: minor illnesses and other financial stresses, such as paying for a child’s college education.

It can also be a big differentiator in an adviser’s value proposition, Delaney said. “The large and mid market retirement plans definitely want programs like this,” she said. “They want meetings to be meaningful, not just concerning 401(k)s but with all aspects of their financial lives.” More and more, Delaney said, they incorporate the principles of financial wellness into all communications. “It’s more engaging for participants, and clients enjoy a more holistic view,” she noted.

Davidson stressed that just as one workout does not make a person achieve physical fitness, one financial wellness seminar does not make a person achieve financial fitness. “Financial wellness is a lifestyle choice,” Davidson said. “It’s a process, not an event.”

More information about Financial Finesse is at their website.