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Financial Wellness: The Future of Work
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Speaker: Jake Spiegel Senior Research Analyst HelloWallet Lee Eliav Digital Marketing Manager Morningstar
Moderator: Sarah Sipek
Associate Editor Workforce magazine
Financial Wellness: The Future of Work
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Frequently Asked Ques6ons
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Sarah Sipek Associate Editor Workforce magazine
Financial Wellness: The Future of Work
#WFwebinar
Jake Spiegel Senior Research Analyst HelloWallet
Financial Wellness: The Future of Work
Lee Eliav Digital Marke=ng Manager Morningstar
Financial Wellness The Future of Work
September 2015
What to Expect
1 2 3
What
What is financial wellness?
Why
Why does it matter for employees & employers?
Does It Work
Are financial wellness programs
having impact?
1
What
What is Financial Wellness?
For employers, a basic definition:
o Financial wellness is a program or set of programs designed to
improve employees’ financial behavior and outcomes while also driving business impact
What is Financial Wellness?
For employees, financial wellness is defined by health, not wealth It includes the following elements across an individual’s financial life:
ü Spending ü Emergencies ü Guidance ü Benefits ü Investments
We look at these elements as rungs on a ladder
Investments
Benefits
Guidance
Emergencies
Spending
PRIMARY NEEDS
SECONDARY NEEDS
What is Financial Wellness?
o Specific rung elements to consider include: • Spending less than you earn • Having sufficient emergency savings • Holding enough in a checking account for credit card bills • Having enough savings for out-of-pocket health
expenses • Carrying loan balances appropriate for your income • Holding sufficient insurance coverage • Saving enough to have sufficient income in retirement
2
The Why
The Roots of Financial Wellness
By addressing the anxieties workers had about their future economic security, the hope among policymakers was that workers would feel more comfortable spending their paychecks instead of saving. It worked.
EXAMPLE 1
1935 Social Security Act
1950
11%
2015
5% PERSONAL SAVINGS
RATE ONLY
15%
of workers list retirement as their top financial priority
FOR EVERY
$1 Contributed to Social Security
THERE IS A DECREASE OF
$.50 In Private Wealth
FINANCIAL PRIORITIES
EXAMPLE 2
The National Housing Act of 1934
By subsidizing the housing market, the hope among policymakers was that workers would feel more comfortable buying homes. It worked.
HOME OWNERSHIP RATES
SHARE OF GDP GOING TO HOUSING
SHARE OF INCOME GOING TO HOUSING
59
60
61
62
63
64
65
66
67
68
69
70
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013 24%
25%
25%
26%
26%
27%
27%
28%
28%
29%
29% 1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012 0%
1%
2%
3%
4%
5%
6%
7%
8%
1947
1952
1957
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
EXAMPLE 3
Agricultural Adjustment Act of 1933
By subsidizing corn, soybeans, and cattle feed, the hope among policy-makers was that demand for these products would increase. It worked.
2X The Average American Consumed Nearly
MORE CORN
In 2000 than in 1950
7X MORE CORN SWEETENERS
Are consumed per capita each year in the US
85 LBS
OF CORN SWEETENERS
AND
Unfortunately, this helped to also make workers much less healthy and much more expensive to insure.
Than they were in 1950
30 POUNDS HEAVIER
The Average U.S. Worker in 2000 was
From what it was in 1950
TRIPLED
The American Adult Obesity Rate in 2000
2 3 OUT OF
American Adults are now Obese
EXAMPLE 3
Agricultural Adjustment Act of 1933
Bottom Line
The Financial Wellness Market is decades in the making. It grew out of deliberate policy decisions that had unintended consequences.
Why Now? We’re Approaching a Perfect Storm
Benefits • Increasing Costs • Consumerization
Wages • Remain Flat
• Not Optimized
Behavior • Spend Economy • No DB Security
Benefit Costs are Skyrocketing
0%
20%
40%
60%
80%
100%
120%
140%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Retirement Spending Health Spending
Percent Change in Spending Since 1988
Efficacy Increasingly in Doubt
23
24
25
26
27
28
29
Avg Male BMI Avg Female BMI
0
5
10
15
20
25
1992 1995 1998 2001 2004 2007 2010
Average BMI Median Months of Annual Income Saved
2% 2002
54% 2010
73% 2014
In Response to These Trends: Employers Are Consumerizing Benefits
Share of Large Employers Who Offer Consumer Driven Health Care Plans
Employees Lack the Foundation
Investments
Benefits
Guidance
Emergencies
Spending
SHORT-TERM NEEDS
LONG-TERM NEEDS & CORPORATE SPENDING
State of Consumer Finances
15% HAVE A BUDGET
Workers can’t know how much to save for healthcare and retirement, if they don’t even know how much they
spend on groceries
55% SPEND MORE THAN EARN
Workers don’t feel like they can afford savings increases
or manage this financial responsibility if they spend
more than they make
60% GROW DEBT
FASTER THAN SAVINGS
Workers cannot hold onto accumulated savings if they are accumulating
more debt than savings every month
Financial Wellness Has Come Out of Nowhere
0
20
40
60
80
100
120
140
160
180
200
Jun-
04
Sep
-04
Dec
-04
Mar
-05
Jun-
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Sep
-05
Dec
-05
Mar
-06
Jun-
06
Sep
-06
Dec
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Mar
-07
Jun-
07
Sep
-07
Dec
-07
Mar
-08
Jun-
08
Sep
-08
Dec
-08
Mar
-09
Jun-
09
Sep
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Mar
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Jun-
10
Sep
-10
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-10
Mar
-11
Jun-
11
Sep
-11
Dec
-11
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
Mar
-14
Jun-
14
Sep
-14
Number of Media Stories About Financial Wellness
And It’s Gaining Momentum
2014 Aon-Hewitt Survey
2015 Aon-Hewitt Survey
76%FINANCIALWELLNESS
OF COMPANIES ARE PLANNINGTO FOCUS ON EMPLOYEE
Why Think About a Program?
A thoughtful financial wellness program: o Is a “win-win” for both employees and employers
For Employees: • Reduces financial stress • Reduces time spent on
financial matters • Improves retirement readiness • Improves benefit optimization • Improves financial confidence • Increases job satisfaction
For Employers: • Reduces absenteeism • Increases employee
engagement • Reduces compensation and
healthcare costs • Reduces payroll taxes • Increases job tenure
What to Consider
5 Important Components: ü Behavior Change ü Holistic Consideration ü Personalization ü Independence ü Data
Areas of Caution
Top 3: ü Standalone Education ü Free! ü One Size Fits All
How Programs Differ
There are many different types of “financial wellness” offerings: o Think of these in terms of focal area and delivery method
Focal Area (Ladder): • Spending • Emergencies • Guidance • Benefits • Investments
Delivery Method: • Software • Advisors • Content • Consulting Services
3
Does It Work
HelloWallet Impact
HelloWallet Impact
HelloWallet Impact
Overall Financial Well-Being Influences Tenure Rates
Emergency Savings Insufficient >> Sufficient
Credit Card Debt Revolving >> Not Revolving
Increase in Job Tenure 28% 10%
Increase in Job Tenure
Leads to a Leads to a
HelloWallet Impact
Increasing Retirement Readiness Has Implications on Long Term Compensation Spend
Younger Workers
Replace Them
Reduction in Compensation
Spend
Older Workers Retire
ROI Insurance Industry*
Average compensation for employees aged 60-65 Average compensation for employees aged 22-30
Net replacement impact
*Source: Federal Reserve
$30,906
$70,436
$39,530
Questions? Comments? www.hellowallet.com [email protected] [email protected]
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