Measuring Financial Wellness

Post Written by: Christopher M. Stock, MBA, AIF®

Establishing financial wellness metrics has become increasingly important over the last year. The COVID-19 pandemic has created economic hardships for many American families, depleting emergency funds for some and forcing others to take on additional debt to cover necessary expenses. At work, the resulting stress can lead to increased absenteeism, decreased productivity and greater health care costs for plan sponsors.

Helping employees improve financial wellness is key to mitigating a number of these risks. A 2019 EBRI survey found top reasons organizations provide financial wellness programming include: enhanced satisfaction (46%), reduced financial stress (42%), increased retention (35%) and improved utilization of employer benefits (35%). But in order to tell if what they’re doing is making a meaningful impact, organizations need appropriate metrics to gauge the extent to which their financial wellness program is meeting both company and employee objectives.

Two Types of Financial Wellness Metrics

To assess the effectiveness of a financial wellness program, appropriate metrics tailored to program goals should be established for both individual participants and the organization as a whole.

Individual Measures. An assessment of financial wellness should not begin and end with a participant’s 401(k) contribution rate — and according to the Retirement Advisor Council, it should be done periodically. A Financial Health Assessment could look at a wide cross-section of financial behaviors above and beyond retirement planning, including emergency savings, budgeting, asset protection, estate planning, and debt management. Employees are encouraged to take the assessment periodically to monitor progress.

Organizational Measures. These can include company-wide retirement plan participation rates as well as various program engagement measures such as web portal activity, webinar enrollment, and registration for group and one-on-one consultations. Aggregate quantitative participant data allows plan sponsors to determine the efficacy of financial wellness programming on a broader scale. According to the Society for Human Resource Management, complementary qualitative data can also be readily obtained through informal surveys, employee focus groups, and exit interviews.

Utilizing Financial Wellness Data

More important than merely collecting financial wellness data, however, is using it to benefit workers — and the organization. Upon completion of a financial assessment, a participant’s overall score is broken down into four components based on employee reports of their needs and goals: retirement readiness, protection planning, personal finance behaviors, and investment planning.

Armed with this information, financial professionals can develop a customized action plan based on identified priorities. Resources tailored to a participant’s financial wellness assessment might include group workshops, one-on-one meetings, and online educational materials. Aggregate employee data can help sponsors more effectively evaluate their program’s efficacy, utilization, and ROI.

As areas of concern are identified, additional resources should continually be developed and deployed to address them.

 

Sources

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/take-steps-to-measure-and-enhance-financial-wellness-success.aspx

https://www.ebri.org/docs/default-source/fast-facts/ff-338-fwrc2019-10oct19.pdf?sfvrsn=cbe03c2f_8

https://www.plansponsor.com/measuring-success-financial-wellness-programs/

https://www.retirementadvisor.us/pdf/Research_Rpt_Employee_Engagement_R5.pdf

 

Important Disclosure

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