Episode 6: Financial Wellness
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Hello, and welcome to Revamping Retirement, a podcast brought to you by Cammack Retirement Group, where we tackle the retirement plan related issues plaguing fiduciaries and plan sponsors. Our host, Mike Webb, has more than 25 years of experience in the retirement plan industry and is a nationally recognized subject matter expert. We hope you enjoy Revamping Retirement. Thanks, Kara—Kara McCauley, our producer, and welcome again, everyone. Glad to have you.
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for another exciting revamping retirement podcast, podcast six, how the time flies. My name is Mike Webb and this month’s topic is one that’s very near and dear to my heart, financial wellness. But before we get to that, of course we have our monthly trivia question. And this question was based on a study from T. Rowe Price, who surveyed a whole bunch of employers and found out that 92 % of them thought it would be a good idea to have a financial wellness program. Well, of that,
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number of employers that they surveyed what percentage had actually implemented a financial wellness program. So 92 % thought it was a good idea. What percent actually implemented? The answer coming up at the end of our podcast, but we’ll go right into our financial wellness topic. I really think this is going to be the most critical topic in the coming five years for Plan sponsors—I’d be shocked if it wasn’t.
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The reason for that, I mean if you think about all the other plan metrics that you deal with as a plan sponsor, fees, been there done that, pretty good, getting better. Investments, oh we’ve definitely done that, we’ve spent millions of due diligence meetings on that. Compliance, yeah pretty good with that too. People are starting to realize that their financial responsibility extends beyond investments. But what area are we really deficient at in most plans? And I can tell you that answer is participant engagement. And financial wellness is a way.
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to finally move that needle in a real way and engage participants. Why is that? Because participants, for the most part, don’t care about retirement. It’s somewhere far off. If you say to a participant, I have a plan here called the retirement plan I’d like you to save in it, you know, maybe they’ll get the message, maybe they’ll not. But if you say to a participant, hey, I’ve got a solution for your financial problems, they might perk up and say, hey, I’ve got an interest in that. And that’s what financial wellness is all about.
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it’s kind of taking the indirect approach to retirement engagement by telling people we’re going to address the number one issue you have as to why you can’t save or save more in a retirement plan. I can’t afford it. We’re finally going to address that issue for you. We’ve been talking about engagement in different terms for all this time, but I think we’re going to finally hit the nail on the head and say, okay, why can’t you afford it? Because strangely enough, when you look at participants in retirement plans, and you could try doing this with your own retirement,
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if you’re a plan sponsor out there. The people who don’t participate in the plan or participate at a lower level than they should, it’s not exclusive to the lowest earners in your plan. It can almost guarantee it. And in fact, you’ll probably be shocked at the amount of middle-income earners who don’t participate at all or participate minimally in your retirement plan. And even some high-income earners. Because unfortunately, not being good with your money does not discriminate on whether you have a lot of money or not.
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We’ve seen that with pro athletes, musicians and the like. There’s a big deficit in learning about money in this country. It’s not taught in the schools. Schools are finally starting to teach courses in becoming financially independent. by the way, I use the term financial independence rather than financial wellness. I’m probably not going to win that argument here because financial wellness has been there for a long time. But I one critical element of participant engagement is the fact that
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we need to attract participants to making the proper money decisions. And I don’t think we do that by stigmatizing them. And the reason I say we stigmatize them by using financial wellness is that right away they’re thinking they’re financially sick, they’re financially unwell. Even if you use financial literacy, same thing, am I financially illiterate? I think you get the conversation started off on the wrong foot. And it may sound like a small thing, but if you lose them in the beginning of the conversation, you probably have lost them for good.
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I think we really need to focus on more positive terms like financial independence and even financial flexibility, I’ve heard. We need to obviously take that one step further. It’s not just about terminology, but secondly, we need to obviously interest them in the process of learning about money and even getting rid of that word learning, getting them interested in the process of making better money decisions, I think is the proper term.
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getting them excited about that, getting them actually act, take the appropriate actions that improve their finances, whether it’s tracking their spending, budgeting, addressing their credit cards, addressing their student loan debt, addressing their emergency fund or whatever it is, and probably a combination of several of those things for many individuals. And then finally, and this is the key to financial wellness working, is making them feel good about what they’ve done. To be surprised at the end of what they’ve done.
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on how good the results were and how much of a positive impact it had on our finances so that it’s kind of a cumulative effect where, oh my goodness, I didn’t know it was saving that much money. I can now take some of that, put it in a retirement plan, take some of that, enjoy it, and then do even better because I’m now motivated and I feel happy about it to make even better decisions that’ll save me even more money and will have, you know, obviously a cumulative effect. And…
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I’m not talking in non-concrete terms here. I’ve seen all the financial wellness initiatives. I’ve participated in many as a writer of financial wellness. I eat my own cooking, so to speak, and it works. I can tell you it works. All we need to do is lead employees, participants to the table. If we can somehow engage them, and that’s the big problem as we know, we can make this work. I right now, our plan’s record keepers.
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Check out the last retirement plan communication you sent out. Give it to your average employee who knows nothing about retirement plans. Ask them for their feedback if you haven’t done this, whether they liked it or not. For the most part, they probably think it was pretty terrible and it was boring. It had too many words, too many long words, whatever, too many pages. Record keepers aren’t even getting the basics right on planning communication, so it is going to be a tough hurdle. I’m not saying this is going to be easy, but I think the payoff for this is going to be employees.
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who are, not only will they save more for their retirement and other purposes, not only will they be able to better utilize the plan’s benefits, they’ll be happier, they’ll be less stressed out. And a less stressed out employee is going to be a more productive employee. And if you multiply that by the number of employees you have, I think we can see how a financial wellness initiative can have a tremendous positive impact. But how do we get people there? It’s gonna take a lot, it’s gonna take technology.
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Not all the employees have the same needs. Your millennial with a student loan debt need is going to be very different than the millennial’s mom or dad who has a student loan debt issue because they were paying for the college of their millennial daughter. Very, very different issue. So it’s going to be technology that customizes the data and comes to what an easy to understand, like internet shopping kind of program the person can easily use to fix what’s wrong with their finances. And it’s also going to take a lot more in-person.
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meetings as well—not the typical old retirement plan meetings and benefits there and stuff, but really meaning with the people who can’t afford it and really asking them the right questions to get them to understand that for the most part, employees can afford to save for retirement purposes if they just get their financial act together. So I think this is going to be a combination of technology, combination of face to face, a combination of many things to affect
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a successful financial wellness program. And wouldn’t it be nice? Because we’ve done fees, investments, even compliance. I mean, it’s great. It’s not all that sexy. If you get people to really become masters of their money and be able to go from not participating in retirement plan to maxing out, I think that’s going to be an incredible, incredible thing multiplied by the number of employees in your plan that simply can’t afford it.
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We’re about out of time, so we’re going to get to our trivia question. 92 % of employers think it’s a good idea to implement a financial wellness program. Only 20 % actually have implemented a financial wellness program. So a tremendous opportunity for the record keepers and advisors out there to move the needle, get employers to adopt plans, engage employees, and have wonderful, wonderful outcomes.
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from this great thing that is financial independence, financial flexibility, financial on this, whatever you want to call it, as long as it works. For Kara McCauley and the entire KMAC Retirement Group production team, this has been Mike Webb, and this has been Revamping Retirement.
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The content in this podcast is for institutional investors and plan sponsors. The information is intended to be educational and is not tailored to the investment needs of any specific investor. All examples of investor gains and losses are hypothetical and intended to illustrate the importance of early saving and consistent retirement contributions over time. Investment decisions should be based on an individual’s own goals, time horizon, and risk tolerance. Nothing in this content should be considered as legal or tax advice and listeners are encouraged to consult their own lawyer.
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accountant or other advisor before making any financial decision. Thank you for listening to Revamping Retirement.