Measuring the Success of Financial Wellness Programs

Incorporating sound measures of the effectiveness of financial wellness programs will allow plan sponsors to adjust them to address the varying needs of their workforce.

While some employers are merely concerned with offering financial wellness programs at a reasonable price, others are intent on achieving a specific return on investment (ROI), according to Cerulli Associates.

To help sponsors measure the success of their financial wellness programs, it is important to first determine what specific goals the sponsor has for the program. Next comes setting a realistic time frame for achieving those goals, Cerulli says. Some goals such as improving retirement readiness, cited by 27% of sponsors, are relatively easy to measure. However, others, such as improving financial literacy, cited by 30% of sponsors, increasing workplace productivity (20%) and decreasing employee stress (14%) can be more nebulous.

Cerulli says that to benchmark success, sponsors should ask their recordkeepers to track participant behaviors, such as click rates and interactions per website visits, and work with an adviser or consultant to consolidate data from each of their financial wellness vendors.

Cerulli asked recordkeepers how they measure the effectiveness of their financial wellness programs. Seventy-one percent said participation, 67% website activity, 62% contribution rates, 57% participant surveys, 38% retirement income replacement ratios, and 38% a financial wellness score.

Matt Gnabasik, a partner at Cerity Partners, agrees with Cerulli that measuring financial wellness website activity and obtaining “high-level usage activity information from providers that are part of the program can lend insights into how many employees are using the resources and how frequently they are checking into the offerings. Additionally, plan sponsors can issue a company-wide survey asking for anonymous, candid feedback on the program. This will allow plan sponsors to adjust the program moving forward to address the varying financial needs of their workforce.”

Kent Allison, a partner and national leader of PwC’s Employee Education and Wellness Practice, says that the effects of a financial wellness program that seeks to change participants’ behaviors can be measured by such things as 401(k) deferral rates, 401(k) loans and hardship withdrawals, as well as payday loans. Alan Glickstein, managing director, retirement, Willis Towers Watson, also reports that more companies are beginning to realize that having a workforce that is financially sound does impact productivity and a company’s bottom line.

“We can make a clear business case that when a company’s employees are not financially stressed, they are more productive, which enhances a company’s financial results,” Glickstein says.

Allison concurs: “Our research and data from our current programs has shown that there is a direct correlation between financial stress and lower productivity—which comes at a significant cost to employers and something they measure all of the time.”

Sources of Financial Stress

Cerulli says a survey of 1,500 401(k) plan participants it conducted in the second quarter of this year found that participants under the age of 40 are markedly more concerned about student loan debt. Those between the ages of 30 and 49 are most stressed about saving for retirement, while those 50 and older are most focused on health care expenses. Those with less than $100,000 in investable assets are more likely to cite lack of emergency savings and credit card debt as a financial concern compared to their more affluent peers. Women say their top stressor is retirement savings, and men say it is health care expenses.

Cerulli says the majority of recordkeepers offer retirement income calculators or scorecards as well as a library of educational articles on a variety of financial topics. Cerulli found that 43% of recordkeepers offer financial wellness programs included in the recordkeeping fee, while another 43% say some components are included in the recordkeeping fee but some may require an additional cost.

Large firms might consider creating their own financial wellness programs in-house, while smaller companies may turn to technology providers. To decide whether to build internally or to turn to an outside partner, sponsors should weigh the costs and the time frame.

“Cerulli views partnership activity as a positive development because it helps ensure that participants receive high-quality service from specialized partners,” the firm says. “Additionally, partnerships give niche firms the opportunity to play a larger role in the retirement market, which can facilitate new ideas related to holistic financial planning.”