Financial Wellness Programs Offer DC Recordkeepers New Opportunity to Become Holistic Providers

Financial Wellness Programs Offer DC Recordkeepers New Opportunity to Become Holistic Providers
More Than 80% of DC Recordkeepers Cite a Focus on Financial Wellness Initiatives

SIMSBURY, CT, April 22, 2019 —New findings from a Spark Institute report conducted by Cerulli Associates indicate that financial wellness programs are an area of strategic focus for many defined contribution (DC) recordkeepers. The report combines qualitative and quantitative feedback from 26 recordkeepers representing $5.9 trillion in DC plan assets, 443,000 plans, and greater than 80 million participants.

While the term financial wellness can be ambiguous, at its most fundamental level it emphasizes holistic advice and goes beyond a participant’s workplace retirement savings account. It includes financial budgeting, emergency savings accounts, cash flow management, and debt optimization. “There is increased awareness among retirement industry stakeholders that plan participants do not save for retirement in a vacuum,” states Dan Cook, a research analyst at Cerulli Associates. “The average participant has several competing financial priorities, which can be challenging to manage without access to personalized financial advice.”

Participants in the mass-market (less than $100,000 in investable assets) and middle-market ($100,000 to $500,000 in investable assets) cohorts are less likely than their more affluent peers to select “financial advisor” as their primary source of retirement advice. These individuals are more likely to rely on their retirement plan provider or indicate they have “no source” for advice. “As such, DC recordkeepers play a key role in providing guidance to this group of underserved individuals,” explains Cook. “Oftentimes, a financial wellness program is the most effective framework through which to deliver this guidance.”

Educational content is a key component of financial wellness programs, but these programs cannot be solely founded in educational resources—rather, these programs must be measurable and embrace technology to help participants seamlessly move from ambition to action. The majority (71%) of DC recordkeepers measure effectiveness of their financial wellness programs by participation in education sessions. An additional 67% use website activity (e.g., click rates, interactions per website per website visit) as a measure of effectiveness. “There are a variety of ways to track the progress of a financial wellness initiative,” says Cook. “For recordkeepers, it is important to focus in on key metrics that are most relevant to each plan sponsor’s top priorities.”

These findings and more are available in the 2019 Spark Marketplace Update. For more information, visit http://www.sparkinstitute.org/

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