Investment in employee financial wellness initiatives is failing to deliver by focusing on offering information instead of helping workers to change their financial behaviour, a new report commissioned by MetLife Employee Benefits in partnership with Syntoniq warns.
The report, A Behavioural Approach to Employee Financial Wellness, highlights the “real and pressing need” to address financial wellness and expands on MetLife research showing 36% of employees admit their work performance has suffered because of money concerns.
Behavioural finance experts Prasad Ramani and Alain Samson, the co-founders of consultancy Syntoniq, are positive about the fact that employers are alert to the issue but warn the current “one size fits all” style” needs to be addressed “if employers want to see real and lasting benefits from these programmes and to help their employees with their personal financial wellbeing”.
MetLife research among Employee Benefit Consultants (EBCs) shows 75% believe employee financial wellbeing programmes are the biggest challenge for the industry over the next two years. Around 82% believe increased availability of financial wellbeing support for employees will drive product design in the group risk market.
The report recommends that employers engage with benefit providers to design financial wellbeing programmes and adopt a behavioural approach that is designed to motivate employees to create good financial habits.
It warns that: “Offering employees a bare minimum amount of training or financial counselling is likely to see them respond with the bare minimum of enthusiasm and desire to take action.”
Improving the effectiveness of programmes can be achieved without substantial investment by focusing on behavioural techniques such as increasing employee motivation through self-awareness; redesigning systems to enable good financial decisions; and by encouraging ongoing dialogue between staff and employers.
But a major challenge identified by EBCs is the need to improve benefits communications – 83% of EBCs questioned by MetLife say employers need to enhance communication with staff.
Adrian Matthews, Employee Benefits Director, MetLife UK said: “Improving employee financial wellbeing has real value for employers and there is a strong business case for tackling the issue as financially healthy employees make for successful companies.
“Behavioural finance provides a framework for enhancing the effectiveness of financial wellbeing programmes and the report highlights how it can help businesses and their employees. Employee benefit providers need more insight to help drive engagement and ultimately business success and our partnership with Syntoniq has enabled us to review this business challenge from a behavioural perspective.”
The report points to studies which show that corporate profits can fall by 4% due to employee worries about their personal finances and that nearly two out of five employees (38%) were willing to move to employers which made their financial wellbeing a priority.
The study defines financial wellbeing as having control of finances and confidence in achieving financial goals while being able to withstand financial shocks such as being unable to work as well as having the finances to be able to enjoy life.
It stresses that while offering generic financial education to employees is welcome, that approach often fails as it does not take personal situations into account and does not seek to change behaviour. Financial education needs to be sustained to have a long-term impact.
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