So much of the financial wellness conversation to date has focused on the potential health care cost mitigation of adopting organizations.
A more effective angle, however, may come in the form of the company’s increased ability to recruit, retain, and allow a happier workforce to retire on time.
This provides advisors with a unique way to address financial wellness and differentiate themselves with prospects.
T. Rowe Price conducted a plan sponsor survey in April 2016¹ to get their thoughts about financial wellness and other defined contribution trends. When asked what the major objectives of financial wellness initiatives are for your company, plan sponsors responded with:
These responses are almost identical to the common reasons why employers offer an overall benefits package in the first place—to recruit and retain top talent.
Financial wellness programs, for the most part, are focused on more holistic financial education, such as debt management, budgeting, and saving and spending strategies.
Over the years, advisors and employers have improved overall retirement plan participation rates and perhaps deferral rates through automatic services; however, overall retirement readiness may not be improving. Why? It may be counterproductive to tell employees to save more, maximize the match, and take advantage of compounding if there are larger financial issues preventing them from doing so.
And even if employees are participating and saving at an adequate rate, that doesn’t necessarily mean they have the financial flexibility to cover a financial emergency. Often, retirement savings is the first to suffer when a financial crisis hits.
Unlike implementing services like re-enrollment, where sponsors can see the immediate effects in the form of increased participation, the benefits reaped from implementing a financial wellness program will be realized over time. Depending on the level of debt employees may carry, it may take a few years to make a significant impact on increased retirement savings.
And it’s important to understand that financial wellness programs are not a participant-sold idea or service. They can be a very effective value-add for the employer in the forms of increased retention, higher morale, longer tenure, and potential cost mitigation—that also can have an extremely positive impact on the financial and emotional state of the workforce.
The old mantra of offering a competitive benefits package to “recruit, retain, and reward” needs updating. With an emphasis on retirement savings and financial wellness, the “three Rs” should now shift to “recruit, retain, and retire.”
This is an excerpt of T. Rowe Price’s article, “Recruit, Retain, Retire” and was curated by RPAG.
¹T. Rowe Price/Brightworks Partners, LLC, Plan Sponsor Pulse Survey, April 2016. Survey of 155 401(k) plan sponsors with assets of $100 million or more conducted online, March 22-April 1, 2016.