Insights

Make 2020 Your Employees’ Year of Financial Clarity

January 13, 2020

Employee Benefits

Most of us wish we had 20/20 vision, and if we don’t, we correct it a variety of ways, including glasses, contacts, and even surgery. Imagine if your employees had financial clarity as their vision for 2020 and how it could improve not only their financial bottom line, but your company’s bottom line too.

Financial clarity comes from understanding what financial wellness is and what it means for each person. But do employees and employers have the same definition? Probably not, but when they come to a mutual understanding, it’s a win-win for both sides.

Glass jar filled with money coins for savings

How Employees Define Financial Wellness

If you ask 100 employees what “financial wellness” means, you’ll get a variety of answers that include “I can pay my bills,” “my student loans are paid off,” to “I’m ready for retirement.” In short, it means the employee has certainty that they’ll meet their short-term and long-term financial obligations.

According to Financial Finesse, a firm specializing in financial wellness programs, it means to achieve a state of financial well-being that includes:

  • Minimal financial stress
  • A strong financial foundation consisting of little or no debt, emergency savings fund, and living below their means
  • An ongoing plan that puts them on track to reach future financial goals.

Echoing these attributes, PwC’s eighth annual Employee Financial Wellness Survey asked employees what financial wellness means:

  • Not being stressed about finances: 34%
  • Being debt-free: 18%
  • Having enough savings for unexpected expenses: 16%
  • Financial freedom to make choices: 16%
  • Meeting daily/monthly expenses: 12%
  • Retire when I want to: 4%

It’s apparent that employees want clarity, certainty, and a financial plan. But are employers helping them reach these goals?

How Employers Define Financial Wellness

Employers want a productive workforce that helps them stay competitive. Financial stress diverts employees’ focus from that goal, giving employers an incentive to help change their workforce’s financial lives.

But if you ask an employer what financial wellness is, you’ll receive different answers that range from, “we’re piloting a program,” to “our 401k plan is in place,” and “we have educational tools in place, but no one is using them.” One of the pitfalls is thinking that financial wellness programs are a separate offering from their traditional benefit offerings. The key is to have an integrated, holistic benefit program that addresses all aspects of an employee’s health and lifestyle needs.

When financial programs are positioned as a separate silo of benefits, confusion abounds. Employers remain frustrated that they are expected to know their employees’ financial needs and provide the right programs that end up missing the mark. According to the Employer Benefit Research Institute (EBIR) 2019 Employer Financial Wellbeing Survey, employers have a wide variety of financial benefit plan interpretations:

  • Education or advice: 23%
  • Retirement planning and saving: 20%
  • Being comfortable/financially secure overall: 18%
  • Short term needs/budgeting: 17%
  • Long-term planning: 14%
  • Retirement, medical, bonuses, traditional benefits: 6%
  • Holistic/all aspects of financial well-being: 6%
  • Minimize financial stress, increase productivity: 6%
  • Other: 14%
  • Don’t know: 4%

Given the diverse nature of responses, it’s clear that a consistent financial benefit suite can be a challenge. Offering a holistic program that includes financial wellness benefits starts with a simple step: understand who your employees are and the many needs they have.

One Size Does Not Fit All

Your firm’s industry, location, benefits, and compensation will affect employees’ perception of wellness as will their age, health, education, family size, and financial habits. However, as employers better understand their workplace demographics, they can align their program offerings.

According to the EBRI study, financial concerns varied greatly by industry sector, which in turn would affect the type of financial wellness programs offered. For instance, about half of employees surveyed in the healthcare/social services and manufacturing sectors rank retirement planning as their top concern. But less than a third of employees in the retail and state/local government sectors ranked retirement planning as important, but focused on budgeting as a high priority. General financial planning was also a leading concern for government employees, but was not a high priority for other sectors.

In addition to industry sector, the employee’s generation will change the focus of their financial wellbeing. Baby boomers are typically focused on healthcare costs and preparing for retirement, while Gen X and Millennials may still be focused on student debt and meeting routine expenses. Understanding your multi-generational workforce will help create the right mix of financial wellness benefits that your employees will want and use.

In addition to industry, geographical, and age differences, are there other variables to consider?

The Six Money Personality Types

No matter what age, education, or cultural background, employees have unique money management characteristics. In PwC’s Special Report: Employee Money Personalities, they provide an overview of six personality types and what employers can do to support them.

PwC’s advice for employers to address each personality type includes:

  • Savers: Savers want help when making a big decision. Have financial wellness tools available so they can make their own decisions, including a financial coach to validate their choices. Savers are the largest group who uses financial tools, but only accounts for half of today’s workforce.
  • Givers: Only 35% of this group is on track for retirement, as opposed to 55% of Savers. They’ll need gentle coaching, starting with the advantages of saving for retirement. Givers will often only ask for assistance when in a financial crisis, so be supportive, but provide education.
  • Spenders: As their name implies, they spend money, carry debt, and are the most distracted of all groups while at work. Acknowledge that it is not a sign of weakness to ask for financial help and provide employer-incentives to save.
  • Risk Haters: Help risk-haters with immediate needs like insurance, as discussing emergency funds for potential catastrophes will make them turn and run. They respond to messaging that encourages getting a second opinion, like a financial coach, to start planning for their future.
  • Hands off and Gamblers: Although a small percentage of the workforce, one third of this group wants no help at all, preferring to manage their finances. Just because they’re “DIY” doesn’t mean they don’t have financial stress. Leave the door open to coaching and financial programs so they can reach out when they’re ready.

What Can You Do for 2020?

Developing a successful, holistic benefit plan that includes financial wellness programs start with a “diagnosis” of the the top issues in your company like retirement, student loans, money management, or other financial issues. Engaging your staff is key and leadership support is essential. Some firms start with a company-wide survey, review the results with their benefits broker, and develop financial wellness plans to offer. Finally, leadership can present the survey results – along with an action plan – that shows the company is committed to helping employees get on the road to financial wellness.

What’s the payoff for employers? A less distracted, more productive workforce, who’ll be on the road to achieve financial clarity.

Woodruff Sawyer can help you define what Financial Wellness means for you in 2020 by understanding what your employees need and what benefit programs align with your business goals. To find out more about what lies ahead for the coming year, be sure to watch for our Employee Benefits Looking Ahead Guide for 2020, which profiles what Woodruff Sawyer’s Employee Benefits thought leaders have in store for the coming year.

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All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Kristina Keck

Vice President, Retirement Plans

Contributor, Employee Benefits

Kristina helps lead Woodruff Sawyer’s Retirement Plan Practice, with more than 20 years of experience in the corporate pension and the investment industry. She has been recognized as one of the National Association of Plan Advisors (NAPA) Top Female Retirement Advisors and San Francisco Magazine's Five Star Wealth Managers.

415.399.6459

LinkedIn

Kristina Keck

Vice President, Retirement Plans

Contributor, Employee Benefits

Kristina helps lead Woodruff Sawyer’s Retirement Plan Practice, with more than 20 years of experience in the corporate pension and the investment industry. She has been recognized as one of the National Association of Plan Advisors (NAPA) Top Female Retirement Advisors and San Francisco Magazine's Five Star Wealth Managers.

415.399.6459

LinkedIn