2024: What benefits advisors can expect
It is important as an advisor to understand all these topics and what impacts they are having on your clients so that you can provide the best advice possible.
The focus on affordability
Voters are focused on topics of keen interest to them: their financial position, their security, cost of basic living expenses, and education.
In 2024, we are likely to have an economy that will continue to expand – albeit at a slightly lower rate. The monetary policy from the Federal Reserve Bank’s actions and fiscal policy from the federal government will continue to work against each other and create some concern for businesses and citizens. For example, it is forecasted that the interest payments on the outstanding deficit will be nearly $1 trillion dollars – a number that is hard for most of us to even fathom.
To put this into context, the U.S. gross domestic product is estimated to be $26 trillion, while the total deficit is estimated to reach $31 trillion, having grown by nearly $2 trillion in 2023 alone! In an overly simplistic comparison, if an individual received $1 in revenue but spent $2, what is their ability to repay their debt, or to get ahead? If, over the years, they continue to receive $1 and continue to spend more than that, where are the dollars going to come from to pay the interest on their debt? If they do invest to pay down their debt, that leaves less money to invest in other things. Interest payments on debt produces handcuffs and reduces financial flexibility.
Therefore, it is probable that following the upcoming federal election, political policies will continue to “kick the can down the road” until some unfortunate circumstance results in a fundamental change.
Why is this important? If fewer dollars can be invested in roads, businesses, the defense industry, and Social Security and other social programs such as Medicare/Medicaid, those in need will be most impacted. Without some measurable change in spending policies, the future ability of the government to spend or invest will have some serious restrictions.
For the present, businesses will continue to struggle to find and retain. This upward pressure on wages will put pressure on inflation and the cycle will continue. It will be hard to cure in the short-term and will play out over a longer period of time.
Advisors caught in the middle
For advisors in the benefits industry, their clients will look to find cost savings, which is nothing new to report, but they will be especially careful to balance cost savings against a fear of too many adjustments that may lead employees to jump ship. That said, two-thirds of American workers believe their pay is not adequate to cover the rising cost of inflation, with roughly 62% of the U.S. population living paycheck-to-paycheck. Given these figures, it is probable that employers will move cautiously and will be more data dependent in their decision making in order to stay in line with other employers in their space.
Other important questions that will resurface are focused on the driving forces behind cost increases in pharmaceutical spending and what can be done about it. Overall, when expressed in percentage terms, cumulative medical premiums and inflation grew at an annual rate faster than workers earnings, according to the recent Kaiser Family Foundation report.
Expected trends continue
Brokers and consultants should prepare themselves to discuss culture and inclusion and diversity, in addition to the social and environmental causes taking center stage. Policies will continue at different speeds, based on the area of the country and the leadership of the business.
Another growing trend is employees increasingly want to be involved in decision-making — and this is here to stay. How companies react to these conversations will be examined carefully against employee retention and productivity.
We can’t overlook the variety of generations currently in the workplace, and their greatly varied needs. Businesses will need to adjust their approaches and communication strategies to consider the multi-generational employee populations at their organizations.
We also see a lot of discussion and speculation about what impact AI will have on businesses, the industry, and employees. Each business and industry will need to examine this independently, but AI is here to stay so it is important to understand it and adapt to it, if appropriate.
In closing
Without a doubt, the new year will be challenging for advisors. Businesses may be focused on other issues that are not necessarily tailored to employee benefits. But it is important as an advisor to understand all these topics and what impacts they are having on your clients so that you can provide the best advice possible.
Perry Braun is the President & CEO of the Benefit Advisors Network (BAN) – an exclusive network of progressive and independent employee benefit brokerage and consulting companies in the U.S. and Canada.