How companies are using tech to boost their employees’ financial wellness and loyalty
Employers are increasingly looking to fintech start-ups and apps that help employees with direct saving, emergency lending and financial literacy.
Financial wellness programs are now offered by 53 percent of firms, which is double the number seen in 2015, according to a Bank of America Merrill Lynch survey. This augurs well for retirement readiness, because there is evidence that workers who are engaged in a financial wellness program increase their retirement contribution rates by 38 percent. Furthermore, employees who feel in charge of their financial wellness report having less stress, according to Questis research, which enables them to be more engaged in the workplace. Simply put, they have a plan and they aren’t constantly waiting for the “other shoe to drop.”
Related: 6 ways employers are changing their approach to employee financial health
Yet, the focus on financial wellness is a relatively new phenomenon, one that is gaining traction as employees expect their employers to provide services to help them manage their overall financial picture. For decades, the financial education offered by companies was a mixture of carrot and stick. They reminded employees to plan for their retirement and encouraged them to capture the full potential of their defined benefit pension plan. But companies fell silent as defined contribution plans, which expose employees to savings and investment risks, replaced defined benefit plans
Employees saw dwindling engagement from their employers at the exact time they needed a helping hand, because their financial journeys had become increasingly complex. Outstanding consumer debt has soared in recent years, surpassing the $4 trillion mark earlier this year. This mountain of debt, combined with higher health care costs, can overwhelm employees of all income levels, affecting their performance and morale. This is bad news for companies, because stressed employees are less productive. This is why firms are now looking to do more than simply set up 401(k)s and then tune out of the topic of financial wellness. They are beginning to engage in the manner of good shepherds.
Companies are now helping employees–whether they are recent medical school graduates, middle-aged parents with a growing list of financial dependents, or retirement-age workers worrying about the cost of pet insurance–to draw up detailed, personalized financial wellness plans. This engagement consists of more than regular videos on employee websites or biggest saver-style competitions, although both are very useful for raising awareness about retirement readiness. Firms are increasingly rolling out workshops, seminars, and counseling sessions that are tailored to their employees’ various demographics and financial situations, whether that is younger people budgeting, or older workers planning for an ageing parent’s care.
Technology is increasingly playing a role in these initiatives. Some of the winners of the annual competition held by the J.P. Morgan-founded Financial Solutions Lab include fintech start-ups Onward and HoneyBee, which are both apps that help employees with direct saving, emergency lending and financial literacy. The Questis platform uses features such as chat and personalized goal-setting that allows companies to communicate and engage as well as educate. This is crucial, because struggling employees need more than education: They require step-by-step instructions on drawing up and executing a plan. BlackRock and Fidelity have also partnered with third parties that help employees with everything from rounding up spending transactions to refinancing student loans.
Companies can also opt to build their own financial wellness platforms, and such initiatives do not need to be technologically complex. For example, employees could be guided towards a mini site when they are filling out their 401(k)s. The platform could allow workers to enroll without extra passwords, enabling them to easily check their balances and benefits. The sites could provide resources such as retirement planning materials, quarterly statements and online calculators. Some companies might choose to enhance their sites with guest articles from experts about distribution options or investment advice.
It is not just employees approaching retirement age that will benefit from such initiatives. Our recent study showed that 67 percent of millennials currently have some kind of a retirement savings plan, and almost half (49 percent) currently invest in a 401(k), 403(b), pension plan or similar program through their employer. But the study also showed something else: This generation has more confidence in savings accounts than other types of retirement solutions. Around two in three millennials report they are confident or very confident in savings accounts, while 58 percent are confident in workplace retirement plans like a 401(k).
This mindset hints at a generation of around 83 million people that can benefit from a technology-based financial wellness platform with a human touch. They are thinking about financial balance but they desperately lack the knowledge and guidance to set them up for success. Companies who want highly motivated employees with the greatest productivity should consider enhancing their benefits experience with these tools.
The benefits of engagement are mutual. For example, Google saw a 37 percent jump in employee satisfaction after boosting investment in support for their workers. And after launching a student debt refinancing program last year, one major asset manager saw a 75 percent reduction in first-year employee turnover among employees participating in the student loan program. One in two new hires also said the program was “a major factor” in their decision to join the firm. If companies seize the day on financial wellness, they can expect similar rewards.
Cindy Dash is general manager and senior vice president at Matrix Financial Solutions, Broadridge.
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