Explaining Financial Wellness

In this blog we’ll look at the evolution of financial wellness across the US, Ireland and the UK, sharing our experiences of trends we are seeing in each of the markets.

Financial Wellness has been a core part of the employer and employee relationship in the US. Kent Allison, the leader of our Financial Wellness practice in the US, highlights that financial wellness and financial education are two separate but closely related issues.

In our experience, many employers are putting in place financial education programmes which are supported by providing access to financial support and products that are directly related to the needs of employees.

In the UK, many employers are recognising that financial education is more than just supporting people with savings and debt. There is an increased recognition that poor financial wellbeing can have a detrimental impact on mental health. Research from the Money and Mental Health Institute shows that two thirds (67%) of employees who are finding things financially difficult report at least one sign of poor mental health.

In addition, we are seeing an increased focus on employers supporting people who may have elderly parents or relatives that are moving in to a care environment. Research from the UK Care Guide shows that Live in Care costs can range from £750 - £1,500 per week. This is a significant expense that many don’t plan for until it is too late. Therefore, helping people think about these things early, as well as related issues such as getting Lasting Powers of Attorney set up or making sure a Will is in order, is something we are seeing more on. Employers recognise that helping people deal with these things in a planned manner will significantly decrease stress and wellbeing later down the line.

We discussed these topics in a recent webcast, which you can listen to here. We have also shared some of the key questions and answers that were discussed below.

Financial Wellness Q&A

What is Financial Wellness?
Financial Wellness is about enabling employees to take incremental steps to adopting better financial behaviours. It is about bringing an individual to a peaceful state around their finances – comfortable that they are living within their means, meeting their goals and thinking about their future comfortably.

Is there a one size solution which fits all?
Wellness is completely individual, what it is for one employee will not be necessarily aligned to their colleagues. Education supports a financial wellness program but it must be delivered on individual needs, it must motivate, enable and reward actions and provide support.

Is it not Financial Literacy under a different name?
No, a Financial Wellness program addresses many more areas from cash management, retirement to later life care. It is a more holistic approach to an employees’ financial wellness and not a single focus for all employees which often focuses on the negative as opposed to the positives and areas for improvement.

What are the key drivers from large employers providing Financial Wellness programs?
One of the key drivers is the correlation between financial stress and an employees’ physical well-being and how this is having a direct impact on costs.

Employees feeling stressed about their finances are much more likely to be distracted at work by their finances. Employees are less productive which has a direct impact on costs for employers.

Is Financial Wellness delivering value to the employers providing these programs?
The focus of Financial Wellness is on enabling employees, it is providing a bridge between a fully paternalistic approach and a hands off approach. Financial Wellness can provide the tools to help employees to make better choices. The real value is a greater appreciation of the overall benefits package being provided by the employer.

In terms of the US, what is the demographic of employee who benefits most from a Financial Wellness program – is it people in their 20’s, 30’s, 40’s or is it an older generation?
Financial Wellness is not generational as each generation has their challenges, from student debt, cost of living concerns to retirement and the ability to retire. A Financial Wellness program provides a life stage and needs based approach to allow for each stage in life.
Financial Wellness is about helping employees to adopt better financial behaviours which will help them deal with those financial events as they arise.

Are Financial Wellness programs important in the attraction and retention of talent?
A Financial Wellness program is helping employers to provide a more personalised reward approach to align with their employee needs and overall profile. Employees are being asked more and more to make their own decisions, but they want someone to validate and inform that decision. More and more employees want help around understanding and using their employer benefits to help their finances.

The program helps to build an inclusive work environment and a value system, these qualities in an organisation are attracting and retaining talent.

Is it only employees seeking Financial Wellness programs or are employers seeking the support these programs provide?
The challenge of defining the ‘employee proposition’ is being experienced by lots of large organisations. Employers are providing a wide range of employee benefits, the challenge is now how you to understand if they are valued and / or even understood.

A Financial Wellness program is providing employers with the information to diagnose and answer some of these questions. They have more clarity on what is valued and are there any gaps.

Is Financial Wellbeing correlated with income levels?
Financial Wellness is not a sole function of your income level or overall net worth. The underlying issue in our experience for people of all income levels is how to strike a balance between living contentedly on their current resources today and also being confident about their planning for the future. People was to know they have some resilience in the financial situation with the appropriate protection in place should those events arise which life inevitably throws at you.

Saq Hussain

Saq Hussain | DC Pensions and Benefits Leader
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