Financial Wellness Programs: People Engaged With CFPs Far More Prepared

Financial Wellness Programs: 2015 Year In Review by Financial Finesse

Some key findings were:

1). According to a new study by Financial Finesse, employees who engage in multiple live interactions with a CERTIFIED FINANCIAL PLANNER™ professional experience a much higher degree of positive behavioral change than those that engage solely online:

  • 80% have a handle on cash flow, compared to 66% of online-only users
  • 72% have an emergency fund, compared to 50% of online-only users
  • 98% contribute to their retirement plan, compared to 89% of online-only users
  • 48% are on track for retirement, compared to 21% of online-only users
  • 64% are confident in their investment strategy, compared to 42% of online-only users

2). The Gender Gap in Financial Wellness narrowed in 2015, due in part to a larger percentage of women employees who repeatedly interacted with their financial wellness program. A look at 31 key financial wellness questions revealed the overall Gender Gap in Financial Wellness declined from seven percentage points in 2014 to five percentage points in 2015. Of employees that were repeat users of their financial wellness program in 2015, 71% were women.

Executive summary

The American worker did not have much to celebrate in 2015. Real wages grew at an anemic 2%, the stock market ended the year in negative territory, and overall financial wellness remained virtually unchanged. Despite these challenges, employees who have repeatedly engaged in their workplace financial wellness programs managed to make progress. Of these repeat users:

  • 66% are comfortable with their debt, up from 63% in 2014
  • 39% are confident they are on track for retirement, up from 34% in 2014
  • 55% are confident that their investments are allocated appropriately, up from 52% in 2014
  • 31% report having taken a retirement plan loan or hardship, down from 33% in 2014

Further improvements were observed by employees that interacted multiple times with a CERTIFIED FINANCIAL PLANNER™ professional. Of employees that had five or more live interactions:

  • 80% have a handle on cash flow, compared to 66% of online-only users
  • 72% have an emergency fund, compared to 50% of online-only users
  • 98% contribute to their retirement plan, compared to 89% of online-only users
  • 48% are on track for retirement, compared to 21% of online-only users
  • 64% are confident in their investment strategy, compared to 42% of online-only users

While financial technology is certainly helpful, our research suggests technology alone is not enough. Worried employees make more progress when they talk to a real person. Financial wellness programs which incorporate a multi-channel approach, including live, online, and telephonic services, have been shown to consistently move people in the right direction. In the absence of any human interaction, employees will likely get stuck at one stage and have challenges moving forward.

Financial Wellness Programs

Financial Wellness Programs: 2015 At-A-Glance

Employees that took a Financial Wellness Assessment in 2015 reported slight declines in the areas of cash flow and debt management, but slight improvements in retirement preparedness and investor confidence.

Lackluster wage increases may have contributed to the declines in cash flow and debt management wellness, while increases in investor confidence during the first half of 2015 were all but eliminated thanks in part to stock market volatility in the second half of the year.1

Financial Wellness Programs

American employees continue to worry about their personal finances, with good reason. Based on an assessment of their vulnerabilities, employees are taking a clear look at their financial situations and identifying their challenges. The top vulnerabilities for all employees are:

Financial Wellness Programs

Financial wellness programs are making progress, especially in reducing plan leakage, narrowing the gender gap in financial wellness, and offering a coaching framework for employees to tackle debt problems.

Overall, companies providing financial wellness programs continue to see a reduction in the percentage of employees who reported having taken a retirement plan loan or hardship withdrawal, coming in at 23% in 2015, down from 30% in 2013. As more employers adopt robust financial wellness programs, we expect these improvements to continue.

Financial Wellness Programs

The gender gap in financial wellness is narrowing. Sixty percent of financial wellness program users in 2015 were women. This engagement is paying off, as the gender gap in financial wellness is narrowing. The gap between men and women, while still large, narrowed on most key measures.

Financial Wellness Programs

Many employees first come to financial wellness programs to tackle their debt problems. According to NerdWallet’s 2015 American Household Credit Card Debt Study, the average American household with debt carries $15,355 in credit card debt. It’s no surprise then that many employees first interact with workplace financial wellness programs in hopes of getting a handle on their debt.

Among financially distressed employees that took a Financial Wellness Assessment in 2015:

  • 65% feel overwhelmed by their debt, largely unchanged from 64% in 2014
  • 48% do not have a plan for paying off their debt, up from 45% in 2014

Women were far more likely (67%) to say they were overwhelmed by debt than men (58%), and African American and Latino employees were most likely to respond that their debt was overwhelming and the least likely to say they had a plan to pay off debt.

Repeat User Analysis

Repeat users made up 16% of all users analyzed in 2015, up from 6% in 2013 and 15% in 2014. In a year of little change, these employees showed significant improvement in key areas of financial wellness. Repeat users showed an overall improvement in their average financial wellness score of more than 16% from the first assessment to the last assessment. Here are the top 10 areas of improvement among repeat users, ranked from highest to lowest, along with the average overall Financial Wellness Score:

Financial Wellness Programs

When compared to the total population of employees that completed a Financial Wellness Assessment in 2015, repeat users were older, had higher average incomes, and were more often female. This may explain some of the narrowing of the gender gap in financial wellness.

Financial Wellness Programs

A separate study was conducted to measure the effect of various levels of participation in a financial wellness program on behavioral change. In this study, employees were grouped into four categories based on their level of interaction with a financial planner: Online only users (no live interactions), Light users (online plus 1-2 live interactions), Medium users (online plus 3-4 live interactions), and Heavy users (online plus 5 or more live interactions). The results suggest that employees that engage in multiple live interactions with a CERTIFIED FINANCIAL PLANNER™ professional experience a higher degree of positive behavioral change than those that engage solely online.

Financial Wellness Programs

The influence of financial coaching on changing financial behaviors is evidenced by a growing body of applied research (Collins & O’Rourke, 2012; Delgadillo, 2015). A research report commissioned by the Consumer Financial Protection Bureau (CFPB) and conducted by the Urban Institute concluded that “a well-implemented oaching program with engaged clients can produce important improvements in certain key financial outcomes that can be difficult to address holistically through other approaches” (Theodos, et al, 2015, p. 148). Employers that wish to improve the financial health of their workforce should consider adopting a holistic approach to financial wellness that includes access to financial professionals in addition to financial education.

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About the Author

Sheeraz Raza
Sheeraz is our COO (Chief - Operations), his primary duty is curating and editing of ValueWalk. He is main reason behind the rapid growth of the business. Sheeraz previously ran a taxation firm. He is an expert in technology, he has over 5.5 years of design, development and roll-out experience for SEO and SEM. - Email: sraza(at)valuewalk.com