Financial wellness research and insights.
Financial wellness research and insights.
If you haven’t had the chance, do yourself a favor and listen to (or read the transcript of) the recent podcast that industry thought-leader Michael Kitces did with Ric Edelman. It’s a great interview, but there’s one theme that stuck out in particular for me:
The merger of Financial Engines and Edelman Financial now allows the two firms to combine technology and people to build lasting relationships with participants at scale.
And in Ric’s own words:
“We now can provide you human advisors to help [employees] with the broad array of personal finances at no extra cost to either you or the employee. How many 401(k) providers can offer that? So the value proposition skyrockets for us and Financial Engines, the value to the client is massive.”
– Rick Edelman on the Financial Engines merger
Ric goes on to highlight that because they have the scale to work with individual employees, they’re building long-term relationships and “we get to a world where by the time the client actually shows up as an advisor rollover, they’re not unattached, they have a 9-year relationship with an existing EFS advisor.”
You don’t have to be Financial Engines or Edelman Financial to see that this service model of individual coaching and support for employees is attractive to employers, while also being a great, profitable service model for advisors. Now, whether you give the service away for free or charge for individual coaching is up to the advisor, but Ric’s doing you a favor and telegraphing how the DC business is slated to change.
Additionally, leading retirement plan firms, including CAPTRUST, are shifting towards doing more individual work with employees. In the words of CAPTRUST CEO, Fielding Miller, he recently declared in an InvestmentNews article, “We definitely tilted toward doing more wealth management transactions.”
For those who want to read, the writing on the wall is pretty clear. Retirement plan consulting is only going to get less profitable, so advisors need to find new ways to add value and generate revenue.
There’s a dirty secret that plan advisors know, but are not willing to admit to employers, and it’s this:
Financial wellness programs do not change behavior.
So let’s think through this as plan advisor. Even though you know that financial wellness programs do not change employees’ behavior, you’re under pressure to offer a financial wellness program to clients. So you select one that is easy to implement – a program that you don’t have to spend much time implementing or supporting.
Instead of recognizing this employer need as an opportunity to differentiate your services, promote your unique value proposition (i.e. your team and service model) and deliver a profitable new client service, you decide to take the easy way out and provide your client with a content-based financial wellness program providing:
Monthly webinars or seminars
Broadly focused online videos and content
After a year (or two if you’re lucky), the employer realizes that employees are not using this service and it’s not worth renewing. So where does that leave you? With the dubious distinction of having introduced a lackluster, or worse, a failed financial wellness program.
Even more than that, you don’t want to be in this firm’s position, where you pick the “safe” solution and then readily admit that you have no point of differentiation or value-add to your financial wellness program (see fourth paragraph). Why bother?
Now I’ll let you in on another secret- this is what employers really want (these are the actual words of a Retirement Benefits Manager for a large retirement plan):
“I would like for the [financial wellness] program to include individualized and actionable steps to reduce debt, improve saving, and increase deferral rates in the 401k plan, without requiring a big up-front investment of time from the employee.”
Now, what if you could meet that employer’s need and also add greater value by providing a solution where a member of your team automatically coached each employee to success? That means you could:
Integrate your unique value proposition (i.e. your team)
Automate your solution, so that you can easily scale your team
Charge for your team’s time spent with an employee
Build trust and effortlessly uncover new advisory opportunities
This is financial coaching.
Financial coaching is built around your team, incorporates your service model and is a service, not a tool. Financial coaching also introduces a key ingredient that all financial wellness program are missing:
Without accountability, employees won’t act. It’s that simple. Personal finances are too easy to procrastinate and “do tomorrow” (i.e. never), which is precisely what employees do in content-based financial wellness programs.
Also, in a world where more and more advisory services are “productized,” financial coaching serves as a bulwark against being commoditized and helps you differentiate.
What most advisory firms lack are the skills and resources to build out their own custom solution and that’s where Retiremap 2.0 comes in. We’ve already built a fully customized, branded financial coaching platform that can easily be adapted to your firm.
And for a limited time, we’re offering advisors the chance to pilot Retiremap with any plan having up to 250 employees for only $950/year.
We want to show you how financial coaching can transform how you engage employees and open up a profitable new client service that is also fully aligned with your firm’s mission. Watch this video explaining our new Pilot Program:
There are only a set number of pilot spaces available and they’ll be allocated on a first-come, first-served basis.
If you’d like to learn more about the pilot program, watch the video on our Pilot Program page and fill out the form next to it:
Join us for an informative webinar highlighting how the highly customizable To Do Dashboard coaches employees to achieve their financial goals. We will cover both the behavioral strategies and the technology we used.
Please start registering by entering your name and email address. For those who can’t attend our live session, we’ll provide a recording. The session we are offering include:
We’ve just launched the latest enhancement to the Retiremap platform with our new employee To Do Dashboard. We developed the Dashboard with our partners at Duke’s Common Cents Lab in order to take the complexity out of financial decision-making and help people make real progress on their money.
In fact, we created a whole page explaining how it works, so rather than replicating that in this post, you can read all about it here.
If the goal of your financial wellness program is to get employees to take action and achieve their financial goals, then it’s critical to have a financial coach that helps keep employees accountable and feeling confident about their finances.
By incorporating real people into a financial wellness program, you’re able to achieve a much greater impact. Any financial wellness service that does not directly incorporate a coach or advisor into the employee financial wellness program is missing out on what is potentially the biggest driver of behavior change, namely a financial expert to keep employees accountable to their goals.
Since, we recognize that accountability is a key missing ingredient in financial wellness programs, we also believe that when employees do not feel a sense of accountability towards their stated financial goals, they are significantly less likely to achieve them. People work with personal trainers to ensure they exercise regularly and make progress on their fitness goals. Similarly, employees need a financial coach to keep them on track, and ensure that they are making progress on their financial goals. As we all know too well, personal finances can be confusing and that confusion leads us to procrastinate. When an employee is matched with a financial coach, they have an “accountability partner” that helps to keep them engaged and provides them with actionable steps, while coaching them one step at a time.
Additionally, by designing a program that is finite and time-bound, it creates in employees a sense of urgency to complete the program. By setting up the first part of the financial wellness program as a “sprint” when the employee’s motivation is near its highest point, you’re able to get the most action from employees.
Moreover, we believe that the financial education model that nearly all financial wellness programs employ is an ineffective approach. Research has proven that financial education and literacy programs are completely ineffective in getting employees to take action. A meta-analysis of 188 financial literacy and education programs conducted in 2013 and published in “The Effect of Financial Literacy and Financial Education on Downstream Financial Behaviors” by Fernandes, Lynch and Netemeyer found the following:
“Content-based, financial education interventions explain only 0.1% of the variance in financial behaviors.”
In contrast, a World Bank study entitled “The ABCs of Financial Education : Experimental Evidence on Attitudes, Behavior, and Cognitive Biases” found that coaching was dramatically more effective than education.
Nearly all financial wellness providers tout content-based solutions, such as videos, articles and resources centers, when point-of-fact, this approach provides literally zero impact when it comes to behavior change.
At Retiremap, we believe in what behavioral research has shown to work: personalized coaching, multichannel messaging and just-in-time delivery.
That’s not to say that we don’t provide content to help keep employees engaged, because Retiremap does send employees personalized “I saw this article and thought of you…” messages. However, we do not rely on content to change employee behavior, because that flawed approach does not work.
InvestmentNews recently ran an article written by our partners at Duke University, on why education doesn’t doesn’t work and lasting ways to change employees’ unhealthy financial behaviors.
Retiremap is a research-backed employee financial wellness program designed with renowned behavioral economist Dan Ariely and his team from Duke to help employees achieve their financial goals.
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