Does Financial Wellness (Still) Need an ROI?

The ROI for financial wellness has always been elusive—but a new survey suggests that it might not matter.

Asked “Why are you creating or expanding your financial wellbeing program?”, respondents to Alight’s 17th edition of Hot Topics in Retirement & Financial Wellbeing said that not only was financial wellness their top priority, more than half (56%) said that the importance of financial wellbeing has increased at their organization over the last two years, and none said the focused has decreased. 

But—asked why they were creating or expanding their financial wellbeing program, the respondents largely ignored the traditional ROI metrics. The most common answer was nothing more concrete than to “enhance the overall employee experience (85%), and right behind that was the simple proposition that “we believe it is the right thing to do (84%). Even HR’s traditional favorite—“increase employee engagement”—at 72%—was well behind those arguably subjective gauges. 

“Engagement” isn’t exactly a new measure—but even that requires equating employee utilization with a return of value to the organization’s bottom line. It’s not that it doesn’t have value, but it’s darned hard to quantify. Indeed, some experts argue that we shouldn’t even try.

Goals Posts

Well down the list for these plan sponsors were common goals such as improved retirement statistics (e.g., improved adequacy, decreased leakage, higher participation rate), cited by fewer than half (49%), or the traditional “to increase attractiveness and/or differentiate ourselves as an employer,” which was identified by just 47%. The goals that many early advocates of financial wellness had touted—to “decrease employee time spent addressing financial issues (either on the job or through absenteeism)” was mentioned by just 43%, and as for “decreased medical costs”—a mere 14% indicated that was a rationale. Nor was it a matter of responding to worker interest—just 38% cited employees asking for these types of benefits as a factor.

Don’t get me wrong—it’s not as though there haven’t been attempts made to quantify the return on the time and monetary investment in these programs, certainly by the firms that promote these services—but getting to those results generally involves adopting not just the methodologies, but the calculus employed in assigning value to those results. 

Measure ‘Meants’

Despite the well-intentioned efforts of many, financial wellness remains one of those concepts that is still, largely anyway, (just) a concept—one with varied definitions, inconsistent applications, and disparate providers—and thus one that is notoriously frustrating to assign a dollar value[i] to—other than the cost of such programs, which when, done properly, we’re assured, costs money.

In fact, asked how they intended to measure the results of their financial wellbeing program, far and away the most common response—cited by 85%—was employee usage of benefits. As metrics go, it’s certainly an important one—because if the program isn’t being used, there can be no real impact. That said, the kinds of impact that have been more commonly associated with a quantifiable ROI—improvements in retirement statistics (55%), medical costs (e.g., health care, disability, workers compensation) (12%) and reductions in absenteeism (5%)—followed distantly. Even employee engagement—as noted earlier, a notoriously difficult aspect to quantify—was cited by only about half (52%) of plan sponsors—and 6% admitted that they did not intend to measure the results of their program.

Now, these survey results are drawn from a relatively small group of relatively large plan sponsors: 116 of them, albeit with a median employee base of 19,300 (average of 47,000). On the other hand, the patterns at evidence among larger employers have long been seen as a something of a precursor for what will eventually take hold “downmarket.” 

What remains to be seen is whether the apparent diminution of focus on traditional ROI measures among these plan sponsors suggests that those contributions to the bottom line were always illusory—or perhaps that they weren’t a necessary affirmation of the pursuit of financial wellness after all. 

- Nevin E. Adams, JD

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[i] That said, a couple of years back (see Building a Bottom Line for Financial Wellness), I was able to cobble together a formula of sorts, that looked something like “Projected reduction in turnover times current turnover rate times the estimated cost of replacing a worker times the number of employees.” That said, while it’s a calculation with discernable variables, those are still fraught with “fill in the blank” assumptions. 

What’s Holding Back Financial Wellness?

Financial wellness – it remains a hot topic among advisors – but among plan sponsors?

For all the coverage that the subject engenders – and it’s considerable in this space – it’s not unusual to find awareness gaps among plan sponsors, with perspectives ranging from ignorance to ambivalence to downright skepticism.

About a year ago, the Employee Benefit Research Institute (EBRI) conducted a survey of 250 large employers. At the time, the report claimed that while many employers were interested in offering financial wellness programs to their employees, there didn’t appear to be a consensus on the approach.

So, what’s changed in in the past year? Well, as it turns out, not much.

Once again EBRI surveyed large plan sponsors – this time in June 2019, the online survey of 248 full-time benefits decision-makers from companies with at least 500 employees (17% had more than 10,000). Last year’s survey canvassed employers with an “expressed interest in financial wellness initiatives” – and the 2019 version also notes that a “key criterion for participating in the survey was that employer respondents were screened to ensure that had some interest in offering financial wellness initiatives.”

Fertile ‘Grounds’?

And yet, even among a group that would seem to be fertile ground for these programs:

• Only about half report currently offering financial wellness initiatives (about the same as a year ago) – and though 20% say they are actively implementing and 29% interested in doing so – that’s also about the same as a year ago.
• Only one in four (23%) have created a score or metric. 
• Only a third (32%) have done a financial wellness needs assessment

Moreover, making a business case to management surged as a challenge for the programs, cited by 42% of respondents from 24% in last year’s survey. Little wonder since “Lack of Ability/Data to Quantify Value Added of the Initiatives” was cited as a top challenge by 41% of respondents, compared with 25% a year ago. And then there was “Lack of Staff Resources to Coordinate/Market Benefits” – cited by 43% of respondents, versus 27% in 2018.

Ultimately, there’s (still) apparently no real consensus around the definition of financial wellbeing; about a third defined it as (just) having access to assistance and resources that enable good financial decisions, about one in five (21%) defined it as (just) being equipped to achieve retirement security through planning and savings. Only 3 in 10 defined it as (actually) being comfortable or financially secure overall.

Of course, some of that (apparent) ambivalence might be explained by the reality that 29% of respondents describe their level of concern about employees’ financial well-being as “low” (another 49% say they have a “moderate” level of concern).

Or perhaps it’s the reality that while two-thirds (68%) of employers said that more than half of their employees were eligible for the financial wellness initiatives provided, only one-third (36%) of employers thought that a majority of their employees would actually make use of the benefits.

In fact, the top two challenges in offering financial wellness benefits were a lack of interest among employees (38%, compared with 43% a year ago), and complexity of the programs. This year the survey took that complexity question and found that while (just) 31% were concerned about the programs being complex for employees that utilize them – most of the concern had to do with complexity for the employer; just over a quarter (27%) cited complexity in implementing programs, and another quarter (25%) cited complexity in choosing the programs. Employers, it seems – even those with a propensity to consider these offerings – (still) find the (potential) complexity daunting.

Don’t get me wrong. The logic behind these programs is pretty straightforward; it’s about staving off bad financial health, which contributes to (and/or causes) a bevy of workplace woes: stress, which can lead to things like lower productivity; bad health and higher absenteeism; and even a greater inclination toward workplace theft, not to mention deferred retirements by workers who tend to be higher paid and have higher health care costs. It’s a here-and-now focus that speaks to the bottom line, even if the modest amount of academic research on the subject still struggles to make a quantifiable case.

But, at least in the EBRI survey results, it seems as though even the most engaged plan sponsors still don’t quite get it.
And until they do, they won’t.

- Nevin E. Adams, JD
 
See also: “What Plan Sponsors Want to Know About Financial Wellness,” “Building a Bottom Line on Financial Wellness,” and “8 Things to Know About the State of Financial Wellness.”

‘Likely’ Stories

It is customary when sharing (or reading) the portents of a survey to focus on the actions that respondents say they have, or will undertake. But what about the things they say they will not do?

Human beings gravitate toward “norms,” of course. Plan sponsors, certainly those conscious of the personal liability that accompanies those responsibilities, can hardly be blamed for seeking the behavioral norms of their profession, drawing comfort from the collective movement of the “pack,” particularly with new and/or controversial ideas.

Large ‘Charge’

This past weekend I was reviewing Alight Solution’s 2019 Hot Topics in Retirement and Financial Wellbeing report. But, while the positive trendlines on things like financial wellness were interesting, what struck me in reviewing this particular survey were the (relatively) strong percentage weighing in on things they said they were notlikely to do, including:

• evaluate phased retirement alternatives (66% not likely to do)
• offer qualifying longevity annuity contract (QLAC) – 86%
• facilitate purchasing annuities outside the plan as options for plan distributions – 85%
• reduce the number of loans available – 86%
• allow terminated participants to continue loan repayments to reduce frequency of loan defaults – 67%
• offer student loan repayment assistance – 48%
• measure employee perceptions and/or suggestions for benefit improvements – 30%

Not to mention the more than half (53%) who said they were not likely to address lifetime income, a similar 51% were not likely to show projected health care costs in retirement projections, not to mention the 39% who were not likely to discourage cashouts, or the quarter (25%) who were not likely to do anything about minimizing leakage.

Additionally, 25% (up from 21%) had no plans to implement initiative to address the retirement savings gap, 27% (up from 25%) were not at all likely to project the expected retirement income adequacy of the population, and 29% were not at all likely to “offer services, tools, or education campaigns on debt management.”

‘Not’ Likely

While the survey cited an impressive two-thirds of surveyed employers responding they are very likely to take steps in 2019 to create or focus on the financial wellbeing of their workers in ways that go beyond retirement savings – and even though this percentage grew from 30% in 2014 to 65% in 2019 – fully one in eight of these very large employers said they were not likely to create a broad financial wellbeing strategy. And there was the 1 in 10 who said they were not likely to recognize retirement readiness.

It has, of course, long been accepted wisdom that trends among larger employers are instructive in anticipating movements down market – and, in fact, on many things it has been (a notable exception: automatic enrollment, which, a decade after the Pension Protection Act’s implementation, among smaller programs significantly lags adoption by larger plans). Mind you, this survey is based on the perspectives of not just large employers – but very large employers – that employ, on average, 44,500 workers – and 17,000 even at the median (although 2% of the respondents had less than 1,000 workers). Consequently, those trendlines might be meaningful for the plans with which you work (particularly larger employers) – then again, they may not.

More than that, one should, of course, be careful in reading too much into trendlines from one period to the next – it’s rare that the survey respondents in one period are identical to those in another, and thus the difference – be it positive or negative – but particularly when the jumps are large – might be nothing more than what one group of employers say they will do versus a completely different group at a different point in time.

Caution is also warranted in reading too much into statements regarding planned, or intended, actions. While they’re doubtless an accurate assessment of planned undertakings at the time, we’re all very aware of how often those good intentions get derailed by any number of unanticipated events.

That said, I’d argue that in contemplating future trends, there’s merit in spending as much time looking at what plan sponsors say they aren’t likely to do, as we do the possibilities.

- Nevin E. Adams, JD