The retirement landscape is undergoing a profound transformation. What was once a straightforward savings vehicle has evolved into something far more comprehensive: a holistic financial well-being platform addressing the root causes of employee stress and improving overall quality of life.
This shift is driven by organizational goals, including reducing healthcare costs, lowering turnover and enhancing productivity, as well as a deeper understanding of what truly impacts employee satisfaction and engagement. According to research by Your Money Line, 61% of employees report being constantly stressed about their finances, and half say this stress negatively impacts their productivity at work. The convergence of health, wealth and broader benefits represents the future of retirement planning – with financial wellness at its center.
Financial Stress: The Hidden Productivity Killer
The 2023 PwC Employee Financial Wellness Survey reported finances as the top cause of employee stress, with nearly one in three full-time employees admitting that money worries have negatively impacted their productivity.
When employees are financially stressed, it’s impossible to “leave it at the door.” They’re distracted, less engaged and more likely to be looking for another job. Financial stress creates a ripple effect throughout organizations – productivity declines, healthcare costs increase and turnover rises. The American Institute of Stress estimates that job stress costs U.S. businesses over $300 billion annually.
Data Analytics: The Game-Changer
As retirement plans evolve, today’s advanced data analytics capabilities allow plan sponsors to gain unprecedented insights into participant behavior, preferences and needs.
With the right data infrastructure, plan sponsors can identify financially vulnerable segments, personalize engagement strategies, close the action gap between education and behavior change and measure program effectiveness with precision.
At Alera Group, we’re building models for real-time analysis of participant engagement and behavior. The power of this approach lies in its ability to segment participants effectively. Different generations have different concerns. Gen Z and millennials may focus on student debt and emergency savings, while Gen X balances college costs with elder care. Data analytics allows tailored approaches to each segment, making communications more relevant and effective.
Financial Wellness: The Next Frontier
Today’s financial wellness programs go beyond traditional retirement education to include the full spectrum of financial challenges employees face. Effective programs include addressing immediate financial pain points before focusing on long-term goals; offering scalable, turnkey solutions for plan sponsors; leveraging technology for personalized guidance at scale; measuring outcomes, not just participation; and integrating with other benefits for a cohesive employee experience.
The most successful programs recognize that financial wellness isn’t just about education. It’s about driving measurable behavior change through digital tools, personalized guidance and ongoing support.
The most successful programs recognize that financial wellness isn’t just about education. It’s about driving measurable behavior change.
Engagement: The Critical Link
Even the most sophisticated financial wellness program will fail without generating meaningful participant engagement, which requires understanding psychological barriers that prevent positive financial actions and implementing strategies that overcome them, including personalized communications that speak to specific situations, behavioral “nudges” that make positive financial behaviors easier, simplified decision frameworks that reduce complexity and just-in-time education delivered when participants are most receptive.
For wealth management firms, financial wellness programs are a win-win opportunity, representing a chance to do the right thing and the potential to generate significant revenue by establishing relationships early in participants’ financial journeys.
These programs also serve as vital connectors within the broader convergence of health, wealth and employee benefits, helping bring those offerings to life as employees gain a better understanding of how to utilize their complete benefits package effectively. This integrated approach enhances the value of all employer-provided benefits, creating natural pathways among retirement planning, healthcare decisions and other workplace offerings.
Financial Wellness And The Great Wealth Transfer
The financial services industry faces a critical challenge as the greatest wealth transfer in history unfolds. According to Cerulli Associates, $124 trillion in assets will change hands over the next two decades, with $105 trillion flowing to heirs.
But Cerulli also indicates that approximately 70% of heirs switch wealth managers after inheriting assets, underscoring the importance of engaging the next generation before wealth transfers occur.
Younger investors expect sophisticated products delivered simply, technology-enabled service, complete transparency and alignment with their values. Meeting these expectations requires a fundamental shift in how retirement plan providers operate.
The Important Intersection Of Health, Wealth And Broader Benefits
The most successful retirement programs will embrace a convergence model integrating health, wealth and broader benefits. This approach recognizes that financial wellness doesn’t exist in isolation. It’s connected to physical health, mental wellbeing and overall life satisfaction.
The most successful retirement programs will embrace a convergence model integrating health, wealth and broader benefits.
The convergence model addresses root causes of financial stress while providing tools, resources and support employees need to thrive. It leverages data for personalization, technology for scale and human guidance for emotional support and accountability.
For plan sponsors, implementing this model requires collaboration across traditionally siloed benefits functions and selecting partners who understand these interconnections.
Seizing The Future: The Competitive Advantage Of Financial Wellness
The evolution of retirement plans from simple savings vehicles to comprehensive financial wellness platforms represents both a challenge and an opportunity. Organizations that embrace this shift and align these programs with specific business objectives will be rewarded with more engaged, productive and loyal employees.
As you consider your approach to retirement benefits, evaluate your current program against the convergence model, assess your data capabilities, review how well you’re addressing immediate financial pain points and develop strategies for both engaging different participant segments and supporting broader business goals. Identify specific metrics, whether related to healthcare costs, productivity or retention, that your financial wellness initiatives can impact.
The future of retirement planning is about improving financial wellbeing today while building toward tomorrow.
The future of retirement planning is about improving financial wellbeing today while building toward tomorrow. Organizations that prioritize employee financial wellness will have a significant competitive advantage in the talent marketplace.
Christian Mango is the Executive Vice President and National Practice Leader of Retirement Plan Services at Alera Group. He also serves as President of Alera Investment Advisor Retirement Plan Services, overseeing investment strategies and advisor support.
