Two new financial wellness reports contain sobering thoughts for workers and employers, and the financial professionals who serve them.
Prudential Financial Inc. has published a guide to financial wellness programs by two of the company's top executives. Financial Finesse Inc. has released a report on optimizing financial wellness programs for a diverse workforce.
Typical medical wellness program reports give straightforward analyses of how conditions such as obesity and diabetes affect employees' health, and employers' benefits costs, and how employers can use the right kinds of programs to lower benefits costs and increase productivity. Labor groups have raised some questions about wellness program fairness and privacy issues, but most players have agreed on the need to resolve the concerns and keep wellness programs in operation.
(Related: EEOC Updates Wellness Rules)
Many financial wellness program reports have taken a similar upbeat approach to the topic.
The authors of the Prudential and Financial Finesse reports give similar information, but they also take on some difficult questions related to worker demographics.
Here's a look at three reasons the reports are more serious than they sound.
1. The growing focus on financial wellness is a symptom of financial stress.
The concept of financial wellness has been around since at least as far back as the early 1990s, when J. Grady Cash trademarked the term and used it as the name for a financial planning firm he ran in Hampton, Virginia. The topic really took off in the employee benefits community around 2012, when Aflac Inc. reported that fewer than half of the workers it surveyed had at least $1,000 in savings they could use to cover unexpected medical expenses.
Today, many more insurers are putting financial wellness in the spotlight.
One reason is that surveys show that many Americans' finances are in terrible shape. Christine Marcks, president of Prudential Retirement, and Andrew Sullivan, president of Prudential Group Insurance, write in the Prudential report that fewer than 40% of Americans have enough savings in a rainy day fund to cover a $500 emergency.
Only 22% of the individuals who participated in a recent Prudential survey said they felt financially secure, Marcks and Sullivan write.
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A second reason for insurers to focus on wellness is pressure from the U.S. Department of Labor and other state and federal agencies to base investment product recommendations on what workers really need. Financial wellness questionnaires can help insurers that are selling annuities, retirement plan administration services and related products and services understand what workers need.
A third reason is that insurers can sell financial wellness analysis services without worrying about the effects of low interest rates on their general account portfolio yields. Low yields are squeezing the profitability of interest-sensitive products such as guaranteed investment contracts and disability insurance. Offering financial wellness analysis services is a way to generate revenue that's not correlated with interest rates.
2. Some employers might be interested in financial wellness programs because, frankly, they want workers of a certain age to leave.
Some workers now think of working past the age of 65 as a good way to make Social Security benefits and retirement savings last longer.
Government commissions around the world are trying to think of ways to persuade more employers to keep older workers on the job.
