During a recent webinar, “Growth, Trends and Opportunities in the Financial Wellness Industry,” hosted by Financial Finesse, a provider of workplace financial wellness programs, Erik Carter, a senior resident financial planner at Financial Finesse, said “Financial wellness is still a fairly new concept, but it has definitely seen growth over the past few years “. According to the San Diego-based Carter, “Financial wellness firms help people to get on track to achieve various financial goals. It’s beyond just financial education and planning—it’s changing behaviors as well.”
Carter pointed to research that indicates a lack of retirement readiness among employees can actually cost a company money over the long term. “It may cost employers between $10,000 and $50,000 more a year, in health care costs and salaries, to have employees who are still working and unable to retire due to financial reasons.”
Another benefit of financial wellness programs, said Carter, is that financial wellness can lead to physical wellness. He points to the fact that financial stress has been documented to contribute to stress-related illnesses ranging from headaches to high blood pressure. “Recurring financial education can help to reduce stress and health care costs. Some research indicates employees with high levels of financial stress have health care costs that are 24% higher than those with lower levels of financial stress.”
Financial wellness programs take a more holistic, all-encompassing approach than traditional financial planning, said Carter. He cited research that says 80% of employers plan to implement or expand financial wellness programs. Carter foresees triple-digit growth of financial wellness programs during 2014.
According to Carter, the limitations of traditional financial planning include the fact that it mostly focuses on investing assets and tends to cater to higher-income employees. In addition, it does not focus on helping employees develop good financial habits.
Financial wellness programs, on the other hand, cater to employees of all income levels and focus on employees developing positive savings habits. Their approach discusses not only general saving skills with employees but retirement, benefits planning and budgeting skills as well.
“Financial wellness programs can help employees to see how small changes can have a huge impact on their financial future,” said Carter.
He added, “Financial wellness programs need to work hand-in-hand with 401(k) plans, helping employees understand plan features such as automatic escalation or Roth contributions. They need to make employees aware of such features and how to use them.”
Financial wellness programs are more of a coaching of employees rather than simply providing them with financial education materials, said Carter. “The key is to make employees understand what information is applicable to their specific situation.”
« A Reason to Fund, A Reason to Run: Increased Expenses for Private Pensions