David Harris says we should look to experiences and innovations in New Zealand, Australia and the US
Against a backdrop of sharp auto-enrolment (AE) increases for employees and employers, the concept of financial wellness is being increasingly seen as a mechanism for encouraging retirement savings and engaging with related financial products. Solutions have and are being developed in New Zealand, Australia, and mainly in the US, that assist consumers to better grasp and understand their financial capability and develop member engagement outcomes.
Increasingly, citizens in these Anglo-Saxon countries are having to grapple with, at times, complex financial decision-making. While the ‘nudge advocates' see behavioural finance as the panacea for delivering AE coverage and contributions plus additional contributions in a compulsory system; financial wellness strategies derive a more overarching or comprehensive consideration on the future financial outlook of the individual. Simply put, individuals will struggle in appreciating the need for saving for one's retirement if preoccupied, for example, by heavy levels of indebtedness and major health issues.
In New Zealand, financial literacy and budgetary comprehension are being focussed on during their ‘Money Week'. This initiative seeks to look at budgeting and debt management, essentially the building blocks for developing good retirement savings conduct. In Australia, many large industry funds are delivering long-term care planning, consumer banking products and financial guidance initiatives to prepare and help overcome financial doubts for members' futures.
The US has more comprehensive financial wellness programmes that have been developed for longer, which seek to meet the cross-sectional needs of employees and individual workers. Intuitive software, coupled with consultancy and implementation services have allowed individuals to better assess their financial wellness and capabilities, matched against their future goals and expectations. Employers are increasingly accepting that to offer and demand well-crafted employee benefit strategies, broader financial wellness programmes are needed to address broader concerns. Blake Allison, president and CEO of financial wellness software supplier FELA, argues: "Many financial wellness providers often assert that their programmes are designed to help drive positive changes in participants' behaviours which can lead to better financial outcomes. It sounds great, but many approaches to financial wellness lack a key ingredient necessary to make these ambitious goals possible - member engagement. In short, these programmes are often solving the wrong problem because it is impossible to achieve meaningful outcomes without meaningful member engagement. Successful financial wellness programmes in the US have evolved - and will continue to - to first solve the problem of member engagement. If you can engage employees and members in a meaningful way, your financial wellness programme can generate a lot more value than expected."
These salient observations go to the heart of embryonic financial wellness development in the UK. Many employees are disconnected from engagement solutions and programmes concerning their pensions as they are seeking to stabilise debt, health and housing worries. As we see AE contributions now sharply increasing over a short period, seeking financial wellness outcomes will become more pressing. The probability of disconnection from AE and broader financial services programmes thus increases, with further limitation placed on the cross-selling financial services products.
Paul Wilson, corporate solutions director at Aviva, suggests "the majority of people amass most of their lifetime wealth via the workplace. But financial security is now harder to achieve with changes to working practices, such as the growth of the gig economy, and the end of the ‘job for life'. Employers that create an environment where employees can build financial security, and a wider sense of wellbeing and confidence for themselves and their families, will be winners in the search for talent."
The UK is at an important crossroads as it moves financial wellness off a ‘theoretical launch pad' towards the more practical development of programmes that embrace a central outcome: enhanced member engagement.
The need for self-care, a Victorian concept, is becoming more apparent for health, social and financial reasons. Taking action now and in the future is being stressed - a life plan. Such a call to action is provided against a backdrop of declines in DB schemes and paternalism by employers. How we work in the future will be different and financial wellness will be the vanguard of this social transition.
David Harris is managing director and owner of Tor Financial Consulting
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