Why it’s time for brokers to get on board with financial wellness
How do brokers get on board with financial wellness? How can they distinguish between the multitude of offerings and successfully communicate the value of workplace financial wellness programs to clients?
Through Prudential’s 2018 survey of intermediaries, the company learned that the top challenges brokers face in selling financial wellness programs are: cost (21 percent), limited employer buy-in (24 percent), and concerns about return on investment (ROI) or measuring impact (17 percent).
So, how do brokers get on board with financial wellness/? How can they distinguish between the multitude of offerings and successfully communicate the value of workplace financial wellness programs to clients?
Related: Improving financial wellness with voluntary benefits
Benefits managers face ongoing expense pressures, so convincing them to adopt workplace financial wellness programs demands quantifiable evidence that doing so can help solve their top concern: increasing worker productivity.
As consultative partners, benefit consultants should harness the growing pool of data to illustrate the outcomes achieved when employers help employees solve their financial challenges.
Financial stress and its impact on productivity
After family concerns, personal finances top the list of workplace distractions for most workers. This comes as no surprise, as surveys have shown that 66 percent to 80 percent of workers live paycheck to paycheck.
Even with health insurance, many workers could face medical expenses they are unable to pay. It is well-documented that most Americans are unprepared for a $400 emergency. Considering the trend of shifting more of the burden of rising medical premiums from employers to employees, and with annual deductibles for many health plans well over $400, there’s a good chance the average worker could be forced to borrow or sell an asset or raid their retirement account to pay their medical bills.
One of the most common causes of financial stress among Americans is student debt, which is one of the largest obstacles to saving for retirement. Millions of workers are forced to divert savings away from their retirement accounts each year to cover this expense. Over the past five years, the largest increase in student loan debt on a percentage basis has come among 60 to 69-year-olds, who have experienced a 71.5 percent rise in student loan debt. On a dollar basis, the highest increase in student loan debt is among 30 to 39-year-olds, who as a group now hold over $461 billion in student loans. Alarmingly, the median retirement balance among all working individuals is $0. Why? Because 57 percent of working Americans have no assets in or access to employer sponsored DC or DB plans. Delayed retirement has serious implications not only for the individual, but also for employers and early-career workers seeking advancement.
Finally, our research has also revealed that women, minorities and younger workers are proportionately more concerned about their financial futures than many older, white and male workers. As demographics continue to shift, this is a signal that productivity issues resulting from financial stress could find a long-lasting foothold within the populations that will make up a large percentage of the future U.S. workforce.
The clear link between financial stress and worker productivity
A recent case study examining Prudential employees found that those who were experiencing financial stress lost significantly more hours of productivity than their comparatively stress-free colleagues. This was not surprising, as industry research and data mining has shown that employees who experience financial stress miss, on average, a full week more of work than those without. In addition, workers with financial stress are up to 50 percent more likely to experience a disability event.
We can illustrate the potential impact of this on the employer as follows:
Assume in 2009, in a company with 30,000 employees, the average annual salary of employees was $70,000 (approximately $1,350 per week), and they had no access to workplace financial wellness solutions. That year, financial stress had a productivity impact of approximately $13,000,000 (34 percent of 30,000 employees x one lost week $1350).
By contrast, following the implementation of an employer-sponsored financial wellness program, that impact dropped to approximately $6,000,000 (16 percent of 30,000 employees x $1,350) by 2016. That represents an estimated $7,000,000 savings in productivity for the employer, just by helping employees reduce their financial stress.
Additional evidence supports the idea that eliminating financial problems makes a difference, as employees who went from having financial problems to not having financial problems were reported as having:
- 23 percent improvement in depression risk
- 25 percent improvement in overall stress risk
- 19 percent improvement in job satisfaction
- 47 percent improvement in life satisfaction
Redesigning benefits plans without increasing employer costs
Given brokers see the cost as a barrier to selling financial wellness programs, it is important that they recognize and communicate to their clients that most of the time, financial wellness programs can be as simple as redesigning their existing benefits strategy.
A client of ours, a university in the northeast U.S., wanted to implement a financial wellness program but wanted to do so without incurring costs or introducing new benefits.
Instead of introducing an entirely new program, we integrated financial wellness solutions into the university’s existing wellness strategy. We brought in our Health and Productivity Data Analytics and Consulting Practice team, who conducted a participation analysis to examine how well protected their employees were against unexpected financial risks and where there were protection gaps.
Once we helped them figure out which employees were at risk, the university began to strategically engage those employees through targeted enrollment and education. For example, new parents already enrolled for disability insurance were educated on how life insurance can help protect against the risk of premature death.
As a result, the university saw a 31 percent increase in enrollment for their optional long-term disability insurance buy up, a 6 percent increase in enrollment for optional term life insurance, and 300 individual actions were taken by employees to help close coverage gaps.
An unprecedented opportunity for employers and brokers
Today’s employees view their employers as trusted partners who can help them achieve financial wellness. This presents employers with an unprecedented opportunity. Brokers can help employers capitalize on this opportunity by working with them to identify the right financial wellness provider. In partnership, they can design a program informed by insights into the unique financial needs of their employees; successfully educate and engage employees; and help employees take concrete actions to improve their financial health.
The potential outcomes for both employees and employers are a compelling argument for brokers to start investing more in workplace financial wellness programs.
Brokers can best help employers reach this understanding by communicating results achieved by similar firms in terms of increased worker productivity, attracting and retaining talent, improving workforce management and optimizing their overall investment in employee benefits.
Jessica Gillespie is the head of Distribution for Prudential Group Insurance. In her role, she oversees Group Insurance’s Distribution organization and is responsible for sales, account management and strategic relationships. She also drives the achievement of division objectives, working closely with underwriting, product and marketing.