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Financial Advice as a Plan-Sponsored Benefit: Shifting from Retirement & Health to Total Wealth

Human Resources leaders, and the C-suite of many organizations, have long been focused on important aspects of their employees’ financial health. With the advent of the first corporate pension plans at the end of the 19th century to the explosion of defined contribution plans in the 1980s, and the emergence of Health Spending Accounts in the 2000s, both government regulations and employee demands have helped shape the modern definition of “total compensation.” Rather than simply paying an employee a wage for the hours they’ve worked, employers have long understood that people want and need more financial security for themselves and their families.

Employees have comprehensive financial needs

A recent International Foundation of Employee Benefits study of both government and business employers in the U.S. and Canada found that employees have a variety of different financial concerns plaguing their minds each day.

  • 70% face challenges with credit card or other financial debt
  • 61% have trouble saving for retirement
  • 55% have challenges saving and paying for their children’s education
  • 39% are concerned about how they will pay for medical expenses

In juxtaposition to these diverse needs, plan sponsors today often come to the table with a toolbox that is only halfway full (or less!). If an employee has $10K in credit card debt and is making $35K per year and with zero financial education, convincing that person to contribute any percent of his or her income to a 401(k) plan is often a losing battle. An employee who comes home each night to the burden of a stack of medical bills with no clear way to pay them may not see the rationale of taking more money from their paycheck each week and dumping it into a Health Spending Account.

Comprehensive financial education can change the game

The stats we’ve cited on employees’ financial concerns are probably not surprising — just about everyone worries about their personal finances in one way or another. But an important consideration for employers today is, how are these financial concerns impacting employees’ productivity and what can forward-thinking organizations do to help employees become more confident about their personal financial situation?

First, shifting the mindset that only high-earning employees are interested in financial planning is a start. No matter what someone’s job level is within an organization, it is important for companies to offer resources to all employees that can help them feel more confident and prepared to deal with their individual financial situations.

Taking the focus off of just retirement planning or just getting employees to participate in a Health Spending Account and looking at the total financial picture is the start. The next step is to load up the plan sponsor toolkit with solutions that make sense for employees and have the power to make a difference in their financial lives. But how can you bring it to life?

Putting data and the power of digital to work
Although every individual’s situation is unique, most people’s financial lives are not that complicated and a financial advisor could quickly and easily provide advice and tips on an individual basis that could go a long way. A financial advisor, though, usually has minimums and basis points, making it impossible to roll out those types of services in a cost-effective way.

However, the digital age is bringing greater opportunities than ever before for plan sponsors to expand their benefits toolkit and offer more individualized and intelligent life planning resources to all employees. Today, plan sponsors have more information about their employees than ever before but it is often housed in silos either with various service providers or within the organization’s internal systems.

When employers are able to aggregate data such as income, dependents, 401(k) data, health plan usage statistics, Health Spending Account info, pension details and more — a clearer financial profile for each individual begins to emerge. Once all this data exists in a single system, a great deal of powerful advice can be driven off that data algorithmically.

This aggregation of personalized data can then be applied to the process of creating a customized toolkit for each individual employee that can be automated through machine learning and AI and accessed through a single employee benefits portal. Benefits can be personalized to the individuals needs. These kinds of automated tools, alone or complemented by other classroom and online learning opportunities, can make a life-changing difference in employees’ overall financial wellness, workplace satisfaction, and work-life balance as well.

Learn more about solutions for your employees’ financial wellbeing.