Employee financial wellness initiatives are failing to deliver because they focus on offering information rather than helping workers to change their financial behaviour, a new report concludes.
The report, which includes research conducted amongst 200 employee benefits consultants, shows 75 per cent believe employee financial wellbeing programmes are the biggest challenge for the industry over the next two years. Around 82 per cent of EBCs believe increased availability of financial wellbeing support for employees will drive product design in the group risk market.
The report, A Behavioural Approach to Employee Financial Wellness, commissioned by MetLife Employee Benefits in partnership with Syntoniq highlights the need address financial wellness and expands on MetLife research from earlier this year that shows 36 per cent of employees admit their work performance has suffered because of money concerns.
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.
Behavioural finance experts Prasad Ramani and Alain Samson, the co-founders of consultancy Syntoniq, who co-authored the report, argue 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. They argue lasting benefits from employee financial wellbeing programmes are less likely to be achieved from off-the-peg one-size-fits-all propositions offered by some providers.
The report argues that while offering generic financial education to employees is welcome, this 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.
Ramani and Samson argue that programmes need to focus 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 if they are to be effective.
A major challenge identified by EBCs in the research is the need to improve benefits communications, with 83 per cent of respondents saying employers need to enhance communication with staff.
The report references a Barclays study, Financial well-being: The last taboo in the workplace 2014, which showed that corporate profits can fall by 4 per cent due to employee worries about their personal finances and that 38 per cent of employees 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.
MetLife UK employee benefits director Adrian Matthews says: “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.”
