Traditional benefit plans tended to focus on insurance products. However, as recruitment and retention competition heats up, more employers are looking beyond insurance.
Some of these types of benefits have been around for decades, but are getting new attention due to socio-economic conditions like rising inequality, exponential medical costs, and the student loan debt crisis. As medical insurance premiums go up for employers, the value added by reducing employee stress also increases. For employers who may not be ready to assist with student loan repayments, or are forced to pass on premium increases to employees, a financial wellness plan is becoming a necessity.
Alicia Munian with Paylogix caught up with Brent Hines from Foundation for Financial Wellness to discuss the impact of financial stress on employees and how financial wellness programs are helping employees of all ages.
Munian: Benefits are an important aspect of the workplace, impacting both employer and employees. Who does financial wellness programs benefit?
Hines: Financial education mutually benefits both the employer and employees. The employer is negatively impacted when employees are financially distressed. This contributes to decreased productivity, and has even been linked to higher healthcare cost due to the negative impact of stress. Employees rank finance as the top stress in their life. For employees, this benefits them in both short-term and long term ways. Employees can come up with a plan to help guide their financial life and help them to better provide for their families. Employees will be happier overall, and this improves the workplace culture and how they engage with their jobs.
Munian: You mentioned that financial wellness helps to reduce stress for employees. How does financial stress impact a workplace?
Hines: Multiple surveys offer evidence of the impact of financial stress at work. For example, in 2012, roughly one in five employees admitted they had skipped work in the past year to deal with a financial problem. Seven out of ten American workers say financial stress is their most common cause of stress, and almost half say they find dealing with their financial situation stressful. Financial wellness appears to be positively correlated with satisfaction with and pride in the company where one works. Financial stress is often cited as a distraction from work and a factor that reduces productivity and engagement. There is a link between psychological stress and physical health and well-being. With peace of mind through financial wellness, you can have happier, healthier, and more productive employees.
Munian: You mentioned that there is a program that you advise individuals through on the path to financial wellness. How can an individual begin working on their financial wellness journey?
Hines: We have a three-step awareness model that helps an individual tap into where they currently stand, and the financial goals they wish to achieve. We break it down into the phrases: “Be, do, have.” In the ‘be’ portion, people tap into the emotional aspect of their financial journey. They begin to pay attention to their own financial behavior and observe the different patterns that they have. This is vital to the process because decisions happen in the emotional part of the brain, not the intellectual. Once they have that level awareness they can move into the “do” phase. With this, the individual can begin making changes to work towards their goals—the “have.” Often people just want to jump to the “have,” the end goal, but it is a journey that takes steps and progress along the way. Financial wellness programs provide people for a template for growth.
Munian: In the voluntary benefits arena, employers are always trying to stay ahead of the curve and offer the best products for their employees. How is financial wellness changing the face of benefits?
Hines: Initially benefits were administered in a product-minded way. They did not focus on addressing the overall financial wellbeing. This was just putting a band-aid on claims that went wrong, but not addressing long-term fiscal responsibility. With a new focus on financial wellness, it is not just about providing products, but about financial literacy and helping individuals with a more holistic approach. The end goal of a financial wellness programs are to enhance the employee’s overall financial well-being. This supports an employee’s ability to manage both short-term and long-term needs. From our perspective, there is a wider-angle lens than there used to be. People are asking, ‘how can I help benefit someone entire financial wellbeing,’ as opposed to ‘what products I can offer?’ The dialogue has shifted to total financial well-being. We are tapping into their “why” they need extensive coverage versus just speaking about “what” products we can offer.
Munian: Brokers work to provide the best products to employees. Why is it beneficial for brokers to work with financial wellness coaches?
Hines: Financial wellness coaches help to tap into deeper levels of the psychology of signing up for benefits and augment the products that brokers are offering. Brokers can use financial wellness coaches to leverage the importance of the different products they offer. You can offer the best insurance product, but if the individual doesn’t see the value behind it, then they will not sign up. Insurance is not tangible—people buy insurance for their own subjective reasons. It is important to define what exactly people need and identify a plan. Most of the time people are underinsured and an accident happens, and they run into ruin. Educating others and encouraging action and decision making is vital for the benefits marketplace.
Munian: Millennials entering the workforce have caused a shift in the need for benefits offered. What generations can benefit from financial wellness programs?
Hines: There has been an enormous shift in interest across all generations, especially over the last year. I was at a retirement conference recently—the entire conference theme was about financial wellness. So many people are seeing how they can optimize their current financial state to live the lives that they want to live. Millennials are open to advice and guidance and experts speaking more in a holistic way. They view the world different and want to optimize the amount that they are making to travel and experience the world. Speaking to the different generations as they are entering the workforce about what they want, rather than trying to shove products at them is important. Part of the recipe for success in reaching those demographics is understanding what they are seeking.
For more information about the Foundation for Financial Wellness, visit their website www.foundationforfinancialwellness.org/