Employee engagement in financial planning is up—and providers are responding.
By Jeff Miller
Employers and their benefits outsourcing providers have every reason to be encouraged by the evidence that employees understand the importance of saving for retirement. Workers who once viewed their retirement fund as an abstract goal now realize the challenge of ensuring it comes to fruition. More and more, they are turning to tools that help them focus on financial planning holistically rather than just letting tomorrow take care of itself—or not.
The point is well made by our 2011 Mercer Workplace Survey, a nationally representative sample of 1,507 active 401(k) participants who are also enrolled in their employers’ health plans. One of its major findings reported an increase in employee confidence in knowing how to calculate how much money will be needed for retirement, with high-confidence levels up nine percentage points from 2010, to 67 percent of survey respondents.
If the economic turmoil of recent years has a silver lining, it’s triggered a new focus on retirement preparation among plan participants. Real estate investments have bust and 401(k) accounts have diminished, but now employees are ready to take a more proactive role in their financial futures. For benefits outsourcing providers, it’s crucial to make it more efficient for employers to not only manage the spectrum of benefits, but also to offer a more holistic approach to financial planning that participants are looking for.
Fortunately, there are solutions emerging in the marketplace that do just that. One of the leading providers in this space, HelloWallet, offers web- and mobile-based financial guidance, which helps employees improve their overall financial wellness by “finding the money” to boost retirement saving contributions and reduce debt. HelloWallet’s engaging interactive platform offers plan sponsors a way to help encourage employees to create personal budgets, set savings goals, aggregate financial account data, and monitor spending habits.
More specifically, it means helping them to manage money across institutions and accounts by automatically monitoring spending, savings, debt, and investments in one online location, with real-time alerts ranging from overdrafts to insufficient savings notifications. Then there’s the value of helping plan participants make informed non-retirement financial decisions about everything from paying down debt faster to saving for a vacation—even budgeting for college tuitions.
The optimal result is that employees will stick with the program, remaining motivated as they view their financial progress in real time and become more focused on their spending habits and debt reduction strategies. These positive behaviors can play a role in everything from reduced absenteeism and presenteeism (debt-addled employees often struggle with focus and attendance at work, studies have show) to a greater appreciation of total compensation— and, by logical extension, an increase in retention and an enhanced quality of workplace life.
The interest and potential is encouraging. Since going live with this self-service resource last year, participating clients have seen employee utilization rates up to six times the average annual industry standard of 3 to 5 percent for more traditional financial planning tools, according to some estimates. If nothing else, these online tools can help employees see the big picture when it comes to finances and encourage greater control of saving and spending habits.
What may be even more encouraging is the demographic picture. Given that the tools are accessed and utilized online, we initially thought that usage would skew toward younger employees. But we’ve seen a wider response, with approximately 50 percent of users over the age of 40.
Of course, saving, budgeting, and monitoring spending habits are important parts of the financial picture, but there’s a lot more to the equation. For employees at the retirement end of the spectrum, employers need quality solutions, and expect their outsourcing partners to provide them. For example, how effectively can an outsourcing provider extend and enhance its professional management/managed account services and help participants with the retirement spend-down phase?
That calls for a sophisticated menu of services, from steady monthly payouts that can last for life (requiring the purchase of an out-of-plan annuity) to offering alternatives to an in-plan annuity that work with the plan’s existing investment options—as well as providing professional allocation advice for the payout phase.
For the outsourcing community, today’s braver new world of more sophisticated employees requires that we respond strongly to our clients, who are looking for us to help them empower their employees to live, work, and retire well. By making the most of cutting-edge products and services as part of their overall benefits experience, participants can feel more capable and in control of their financial goals and well-being. This can only lead to a more engaged workforce—one that faces the future more confidently and productively than in the dark days of only a few years ago.
Jeff Miller is president and group executive of Mercer’s outsourcing business, based in Norwood, Mass.