As we know, the financial services industry is known for its slow uptake of new technology, favoring instead the ‘tried and true’ tactics...
As retirement plan advisory firms move toward incorporating data and technology to scale the management of plan participants, Questis’ Jamie Linkowski has a number of recommendations about how advisors can do well by doing good and reduce financial risks to employers.
“First of all, the world has been flattened, and it’s accelerating in many ways. The retirement industry has not kept up with the rest of the world in taking advantage of technology and data. Our industry is behind in that data journey, while the rest of the world is just getting faster and faster.”
And data is the key when it comes to integrating health benefits with financial wellness as an employee benefit. Linkowski believes that it’s critical for retirement plan advisors to start thinking of their business in terms of the employer’s business—their income statement and their balance sheet in addition to absenteeism, turnover, and healthcare costs. All of these affect specific top line, bottom line, and shareholder values.
Based on his previous experience, he has seen firsthand how the emotional, physical, and financial well-being of an employee are interconnected. The University of Pittsburgh study in which his client participated showed that employee health and financial well-being are closely correlated and affect work performance. Other studies have shown a statistically significant relationship; for example, employees who smoke and are experiencing financial stress are less likely to attempt to quit and more likely to relapse.
Linkowski believes that the prevalence of financial precarity in the workforce, where employees are living paycheck to paycheck without savings to cushion a financial stress, has led to a situation where it has become a chronic condition like diabetes or hypertension. In fact, since wages are impacted, the cost of financial precarity is much larger than those two medical conditions. The good news, however, is that it’s reversible and preventable. A previous survey of 2,000 workers found that employers who provide both health and wellness plus financial wellness are likely to have a healthier workforce. In that study, employees’ physical and mental health improved and their level of stress was reduced, based on their self-reported outcomes.
“We all know the statistics: 57% of Americans don’t have emergency accounts, 50% can’t afford a $400 shock claim, 70% are not retirement ready and 66% take Social Security early, and thus lose 30% for life on their retirement income. If you make less than $75,000 annually it’s probable that 25% of your take home pay is going to consumer debt. Financial scarcity, aka financial ‘unwellness’, is everywhere in your business. You just need to focus on it to see it.” Faced with those kinds of numbers, it’s no wonder that many plan participants aren’t financially prepared for retirement, or even able to save for it.
Additionally, he points out that this situation “just doesn’t get fixed overnight.”
“No one goes from $48,000 of credit card debt to zero without an incremental plan like a population health program. Participants need help and plan advisors need to manage all of those people through the various stages of that chronic condition. It takes time, it takes tracking, it takes communication, it takes coaches.”
In quantifying the value of addressing financial precarity, attempting to calculate an ROI is a “false narrative. It’s really more about cost-saving, cost-avoidance or overall enterprise risk.” Linkowski compares it to expecting an employee safety program to generate ROI. “What you are really doing is mitigating risk. For example, you wouldn’t not put brakes on your truck, offer safety programs and training, or provide hard hats on a construction site. You would never look for ROI on a safety program, and the same is true of a financial wellness program.”
For advisors, Linkowski stresses that data is paramount to show how they are mitigating financial risks to plan sponsors, and recommends diving deeply into health claims data and retirement readiness data. He sees the configurable survey platform Questis provides as a distinct advantage for advisors because surveying employees regarding their financial health and getting that data is “something that a lot of people don’t do.” In effect, he recommends that advisors start to think of themselves as business consultants.
The rewards can be worth the effort involved in retooling a firm’s business model. According to Linkowski, “The journey is worth it. You will become the alpha advisor if you are taking care of someone’s business and you are taking care of the people in their business. For the advisor, retention will increase, margins will not shrink, and by providing more value to the business, you can even charge more. You will become invaluable and indispensable.”
An additional advantage of this approach for advisors lies in succession planning. “You will also build out the back-office systems, processes, reporting programs and deliverables, along with the requisite efficiencies in your business, so that whether you want to sell it, run it out as a lifestyle business, or merge it with another firm, it makes you more valuable as a business entity.”
Linkowski’s perspective on convergence offers another way for both sponsors and advisors to evaluate retirement plan success in terms of its impact beyond investments and fees. By putting people first, employers can reduce healthcare, turnover, and lost productivity costs, and advisors can build loyal clients. Because health and financial well-being do not exist independently, data, analytics and actionable intelligence are the keys to maximize the value of existing benefits and better define future strategies.