Fostering Financial Wellness On Your Campus Craig S. Cheyne, Managing Vice President VALIC
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Financial Wellness 3
Agenda 1 Financial Wellness: What is it? 2 Why Financial Wellness matters 3 Financial Wellness and stress research 4 Changing money management behaviors Building your own Financial Wellness Program 5 Looking at current practices and trends 6 Q & A 4
Financial Wellness is... Holistic and Integrated - assessing an employee s overall financial health. Financial wellness programs look at how all the pieces of an individual s financial life fit together Behavioral - The focus is not just on creating a plan, but on enabling employees to make decisions and take action to manage their finances. Personalized - helping each employee identify their unique needs to strike a balance between living responsibly today and planning wisely for tomorrow. Objective - putting your employees best interests at the center of their program with no bias toward particular products or service. Data-driven - starting with workforce needs assessments through program effectiveness analysis, data is critical to success 5
Financial Wellness is not... One-size-fits-all Occasional lunch & learns or stand-alone education These are financial wellness events, not programs Annual 403(b) meetings Again, it may be a part of a financial wellness program A web link to your retirement provider or credit union Employee assistance program (EAP) referrals Referring people having financial difficulty is not a complete financial wellness program 6
Prioritizing Financial Wellness Financial issues affect more employees than smoking & obesity 15% of the US population smokes 38% of Americans are obese 40% of employees find it difficult to meet their household expenses on time 45% are concerned about their finances Many people save little, if any, money at all 26% of workers don t put any money into a retirement savings plan 33% of people have no personal savings Centers for Disease Control and Prevention, 2016, 2013-14; PwC Employee Financial Wellness Survey, 2016; Pew Charitable Trusts, November 2015 7
Employees bring their financial concerns to work Problems created by personal financial stress: Increased absenteeism Reduced productivity and teamwork Frequent personal phone calls Lack of ability to concentrate Personal bankruptcies which could reflect badly on school Increased risk of fraud or theft 8
Americas top stress factors 64% say finances and money are the most common cause of stress American Psychological Association, Stress in America: Paying with Our Health, February, 2015. 9
Financial stress is real More than 8 out of 10 employees surveyed reported having financial stress Nearly 1 in 4 indicated financial stress as high (18%) or overwhelming (5%) Increased likelihood for females, millennials, and lower paid employees Financial Finesse, 2016 Financial Stress Report 10
Leaving financial out of wellness comes at a cost Financial stress can impact health and productivity Increased eating, drinking, and smoking Reluctance to spend money on doctor visits Small health issues can become big ones Resulting in lost work time and more stress Lack of sleep can impair immune system and cognitive abilities A diminished immune system can lead to illness A decrease in cognitive skills can result in poor financial decision making A decrease in cognitive skills can result in poor financial decision making These behaviors can also reduce participation in traditional health and wellness programs, compounding existing issues 11
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Financial stress and employer costs Wellness programs impact the issues employers care most about: engagement, absenteeism, stress, and health-related costs 28% of workers admit financial stress is distraction from work that reduces productivity and engagement 46% say they spend 3 hours or more per week working on or thinking about their financial problems Recent study found that employers could receive a 3:1 R.O.I. in financial wellness education PwC Employee Financial Wellness Survey, 2016; Personal Finance Employee Education Foundation 13
Evaluating ROI of a Financial Wellness Program Are more Baby Boomer employees able to retire? Is there greater FSA/HSA utilization due to improved budgeting as a result of the wellness program? Are fewer employees leaving because of pay? Are fewer employees taking loans from their retirement plans? Has employee productivity improved? Review the 12-month impact of their financial wellness programs, and review annually thereafter. 14
Low-cost/high-return opportunity Institutions have invested tremendous resources in health and wellness programs Potential to leverage these investments and create a large payoff for a small expenditure Expand programs that enhance the financial capabilities 15
Employee engagement The difference between satisfying people and inspiring them to do their best Engaged employees Not just satisfied with their jobs Enthusiastic and committed to the mission of the institution Wellness programs generate greater engagement, loyalty and productivity Promote a culture that manages stress and nurtures overall employee wellness And... they can be fun 16
Understanding the Whole Employee Belonging Self- Actualization Esteem Financial independence Wealth creation, investment strategy advanced planning Goal planning, credit, debt investing basics, will, mortgage Safety Stable income, budget, saving, insurance, emergency fund Physiological Food, shelter, utilities, basic money needs *With apologies to Abraham Maslow and A Theory of Human Motivation 17
Understanding the Whole Employee s Finances Understanding the need for savings and investing; balancing mid and long term priorities Investments Optimizing employer-provided benefits to maximize paycheck Benefits Access to professional counsel and direction Guidance Having cash for unexpected expenses Emergencies Developing and managing budget Spending 18
Financial education topics Assess needs and address financial literacy Budgeting basics Using banks and credit unions Setting up direct deposit and online bill payment Credit, debt and cash flow management Taxes and identifying available credits Basic investing, risks, inflation and compound interest Understanding your benefits & Social Security Provide targeted solutions for at-risk groups Tailor material to audience Provide clear, simple next steps for employees to follow 19
Beyond the curriculum Promote split allocation of income to savings and investing Use direct deposit. Encourage employees to split their paycheck Automatically save a portion in a savings vehicle such as: emergency savings account, brokerage account, IRA, or a 529 education plan Promote auto-escalation in retirement accounts Automatically increase employee contribution rates over time Tie financial education to life changes and critical needs Provide employees with financial education around major life events 20
Changing Behaviors If you don t take steps to manage your money your money will manage you!
The goal is behavioral change Create awareness of the need Distribute education materials and tools broadly Keep employees informed of all new offerings Use success stories to inspire and motivate positive behaviors Educate across all levels of financial knowledge Provide understandable worksheets for budgets, net worth, retirement needs, etc. Conduct lunch and learns, webinars and workshops around topics of interest Hold annual financial fair to give employees access to services and opportunities Promote and monitor behavior change Utilize existing EAP to encourage crisis counseling and assistance Calendar ongoing classes with experienced financial and benefits advisors Allow employees free access to personal counseling sessions with advisors Build in accountability Accountability equals effectiveness. Many won t follow through on financial plans - consider peer activities Includes goal-setting and check-ups to keep people accountable 22
Addressing faulty thinking Underestimation: Procrastination: Optimism bias: I don t know how long I will live. I ll do it later. It won t happen to me. Peer pressure: I just can t resist. Immediate gratification: I want it now. We can plan vacations in advance, but not retirement. 52% of workers haven t calculated basic retirement needs. EBRI, Retirement Confidence Survey, 2016 23
Getting started Survey employees Make it about them and their needs, not just the institution. Your employee will be more receptive and participate if they give input. Carefully examine employee data Where are the gaps in benefit plan utilization? Where would you like to see improvements? What kind of training or information-sharing will help you get there? Thoughtfully plan your financial wellness initiatives Remember that you are doing this for your employees, not to them. Keep in mind the awareness, education, and desired behavior changes. Design a solid communication plan Why are your promoting financial education for employees? Be completely transparent. Remember there is always potential for suspicion when money is involved. 24
Financial Wellness checklist Gain support from senior management Determine ownership and accountability Responsibility for activities, metrics and results Establish a budget and available resources Evaluate employees and institution s needs Drill down on behavior of all demographics Determine clear objectives define success For employer AND employees Partner with service providers Create awareness and educate all employees on importance Target messages, personalized invitations, specific segments or departments Measure & analyze results, learn & improve, celebrate successes 25
Building early success Your first two initiatives should correspond to: Most requested information from employees The benefit area the institution would like to see used more effectively Imbed financial wellness concepts into other established programs (think holistic wellness!) This is an easy way to increase the engagement and credibility of programs Develop a data dashboard around intended results to stay on track and keep focused 26
Measuring the impact Starting points for gathering data include: Changes in retirement & HSA contributions & allocations Changes in use of health benefits and wellness activities Volume of benefit calls, website hits, session attendance Disability claims Sick leave utilization and absenteeism Turnover Harder to track: data on productivity Evaluate current wellness participation and satisfaction Assess employees projected outcomes 27
Tips to increase effectiveness Leveraging technology can lower costs, deliver scale Financial fitness starting at employee onboarding Just-in-time education Delivering financial counseling close in time to a decision point may be most effective for certain transactions Gamification is a powerful motivator The power of peer-to-peer support Address emotional factors Feelings such as fear or embarrassment can contribute to poor financial decision-making 28
Current Practices and Trends
Benefits of Financial Wellness Programs Increased productivity, Decreased absenteeism, Reduced administrative expenses, Reduced Social Security payroll tax, Fewer stress-related illnesses, Reduced health care premiums, Greater satisfaction with employer benefits, Reduced turnover, Increased morale and loyalty, Acceleration of worker retirements, and Reduced fiduciary liability and potential litigation. 30
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Integrating Family Financial Education into Wellness 32
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Thank You Craig S. Cheyne Craig.Cheyne@valic.com Please complete the online evaluation form for this session. CUPA-HR will e-mail session evaluations to you today. 38
Required Disclosures Neither VALIC nor its financial advisors or other representatives give legal or tax advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For legal or tax advice concerning your situation, consult your attorney or professional tax advisor. For Plan Sponsor Use Only Securities and investment advisory services offered through VALIC Financial Advisors, Inc., member FINRA, SIPC and an SEC-registered investment advisor. Annuities issued by The Variable Annuity Life Insurance Company. Variable annuities distributed by its affiliate, AIG Capital Services, Inc., member FINRA. VALIC represents The Variable Annuity Life Insurance Company and its subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement Services Company. VALIC.com Copyright The Variable Annuity Life Insurance Company. All rights reserved. VC 26369 (03/2015) J94262 EE
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