Best Practices of Financial Wellness Programs

Improve Retirement Outcomes and Reap Human Resource Benefits

By Jon Maertz, AIF®, CPFA, CRPS®, Senior Advisor, Bronfman Rothschild Plan Advisors

Click here to download this article in PDF format

One of the greatest frustrations plan sponsors face is participants who leave “money on the table” and don’t contribute enough to the 401(k) plan to achieve the full matching benefit. The reasons are real – a drop in family income because a spouse is out of work, student debt, unexpected health care costs or other unexpected expenses. Implementing a financial wellness plan that includes financial education can increase participation and offer other related benefits including improved productivity, mood and culture improvements, higher employee retention, and on time retirement for aging employees.

Financial wellness is a well-known concept that means different things to different people. For most, financial wellness includes educational meetings and presentations to increase knowledge about a company’s qualified retirement plan and how participants can save for retirement. This can include group training sessions or individual consultation in one-on-one meetings designed to give participants individual attention. Wellness programs often incorporate guidance in behavioral finance, helping participants gain better knowledge of how their own actions can affect their financial well-being, as well as personal finance skills such as budgeting, saving for emergencies, debt elimination, and retirement planning.

Effective financial wellness programs that have a meaningful impact include several elements:

  • Identifying investor “types” to help participants select the right approach based on their own capabilities and levels of engagement.
  • Understanding the retirement equation – what participants can control and what is out of their control in defining their own retirement goals.
  • Sharing checklists, target savings rates, and topical education.
  • Leveraging educational tools that can help reinforce the knowledge to make appropriate retirement plan choices.
  • Measuring results including important plan statistics such as participation rates, deferrals, and investment elections as well as other measures such as employee turnover, productivity and other related employee benefit costs.

It is important to recognize that one size does not fit all. Every organization is different. Plan sponsors who make a consistent commitment to education know their employee audience and customize the material to fit their needs. These organizations can reap significant benefits, chiefly among them being the maximization of employees who get the full retirement plan match.

Financial Education Program Goals

Before launching an employee financial education program, plan sponsors must identify appropriate goals for their plan. Financial wellness can mean a variety of things and not all financial education tools make sense for every plan. Identifying the specific circumstances of the plan and its participants can help narrow the program to focus on relevant tools.

Goals for a financial education program could include any of the following:

  • Provide education to help participants understand basic investment concepts
  • Increase participation and deferral rates by employees
  • Retain skilled employees by helping them feel confident about their financial future
  • Increase productivity by employees who feel more financial security and less financial stress
  • Increase the number of employees able to retire “on time” due to adequate preparation and the related reduction in health care and other costs associated with aging employees who are financially unable to retire
  • Reduce 401(k) loans and other debt due to better budgeting and other financial planning by participants
  • Personal financial education around debt reduction and overall financial wellness

Education Policy Statement

Most plan sponsors are familiar with an Investment Policy Statement that lays out the details behind the investment approach for a retirement plan. An Education Policy Statement defines the approach that a plan intends to take in order to reach its Financial Education Program Goals. This statement will identify the type of education a plan intends to offer, why the education plan was established, and includes measurable objectives such as:

  • Increase average employee participation rates to 90%
  • Reach average employee deferral rate of 10%
  • Raise total number of participants involved in asset allocation investment options to 90%

Elements of a Financial Wellness Program

I.   Investor Types Process

An important first step in implementing financial education is segmenting participants based on their own assessment of their financial knowledge and engagement. In our experience, participants fall into three groups:participant investor types

Do It Myself – These participants are knowledgeable and engaged in making their own investment decisions. They feel capable of picking their own investments, can assess their own risk tolerance, and determine their own asset allocation. These participants may engage in financial education programs to augment their skills and are interested in more detailed information and advanced education.

Help Me Do It – These participants are developing their financial knowledge, are engaged in making decisions for their retirement plan, and are looking for guidance on making decisions, leaning more on the retirement plans investment advisors to build and manage a proper asset allocation. Offering model portfolios with a mix of different mutual funds available within the plan can make it easier for them to choose a selection of funds that more closely matches their risk/return profile. These model portfolio selections are professionally managed to meet the needs of a variety of types of investors.

Do It For Me – These participants prefer to hand off the decision making completely and can select a target date fund that incorporates both the participant’s age and projected retirement date in order to invest accordingly. Target date funds allocate assets to U.S. stocks, international stocks, U.S. bonds, international bonds and short-term investments. Participants would pick the fund with the date closest to when they turn 65. These funds operate on a “glide path” meaning, the mutual fund invests more aggressive while the participant is at a younger age and gradually gets more conservative as they get closer to retirement.

II. The Retirement Equation

A financial wellness program should clearly identify what participants need to know and help them recognize what is in their control and what is not.
The retirement equation helps participants understand all elements that will have an impact on their retirement planning. It also clearly identifies those elements that they have full control over, such as their asset allocation, saving, and spending. Some elements—like the market’s returns and government policy on taxation—are completely out of their control, while other elements—such as their employment and earnings or their health and longevity—are somewhat in their control.

III. Financial Wellness Checklist

Plan sponsors should create and share a financial wellness checklist that offers specific strategies participants can focus on to improve their financial wellness. Many participants may not know how to begin taking steps to improve their financial picture. A Financial Wellness Checklist can help them get started and keep them on track. The checklist should include:

  • Create a written budget
  • Set up and save money in an emergency fund
  • Pay off consumer debt (like credit cards)
  • Save three to six months of living expenses in a savings account
  • Invest 15% of household income for retirement
  • Set aside funds for college
  • Pay off home loan early
  • Build wealth

IV. Savings Rate Targets

Once participants are aware of the scope of financial behaviors they need to focus on, many need specific guidance on savings rate targets to make sure they are saving enough. For example, they could start at a low amount like 2%, and gradually increase to a level where they are receiving a full company match (If your company matches up to 3%, a 2% contribution means money is “left on the table”). Participants should take steps to eventually save 10-15% of pay using an annual 1% savings rate increase tool to help them move toward their goal. This helps participants build momentum to reach retirement goals as we see automatic increases in 401(k) contributions become more popular. While it can be difficult for a person with a family to jump from a 5% contribution to 12%, they seem more comfortable with gradual 1% or 2% increases to get them there. Lastly, encourage participants to find ways to reach the annual IRS maximum contribution of $18,500 ($24,500 for those over 50).

V. One-on-One Education

Some plans offer individualized advice to participants. One-on-one meetings give participants the opportunity to ask more direct questions in a private setting with more specific answers based on their situation. The goal of these individual consultations is to give participants individual attention covering items such as risk profile, portfolio review, plan website tools demonstration, or any other questions an employee may wish to discuss with a professional financial planner. Going back to the point that financial wellness it not a one-size-fits-all strategy, it is important for plan sponsors to consider their employee base when determining the best way to facilitate one-on-one meetings between employees and financial planners.

VI. Ongoing Topical Education

Participants want information on topics beyond the traditional enrollment materials and investment selections. Offering educational material and/or sessions on budgeting, debt reduction, retirement income planning, retirement health care planning, and other focused topics can help meet the specific needs of the participant group

VII. Tools and Calculators

401(k) record keepers and service providers offer tools that can augment your plan’s financial education program. Regularly leveraging these tools can help keep financial education in front of participants. Identifying and sharing retirement savings calculators, IRA analyzers, monthly budget planners, cost of debt calculators, and other tools can help to advance the desired financial behaviors.

Some of the leading providers of financial tools include Charles Schwab, Fidelity, The Newport Group, Empower, Vanguard, and ABG Southwest.
One interactive program we’ve found to be effective is Kahoot!. It is an interactive game played with participants to reinforce the material presented, but with a fun twist. Using smart phones, participants on teams answer timed questions about their financial knowledge. Small prizes are awarded to winning groups such as coffee shop gift cards or 100 Grand candy bars. Often, adding a way to get participants actively involved during meetings, along with some fun competition between peers to open conversations about financial wellness, can culture a more positive atmosphere around a sometimes-stressful topic.

VIII. Educational Meetings Summaries

An Educational Meetings Summary tracks the dates, topics, locations, and provides a list of group and individual meeting participants. These summaries provide proof and tracking that participants attended meetings and are making progress toward their financial education goals.

Monitoring Your Financial Wellness Plan

Monitoring financial educational efforts is important not only to make sure that it meets the goals identified by the plan sponsor, but also to determine if it is providing other related human resource benefits for your company.

Before rolling out a financial education program, get a baseline measure of key plan statistics including participation rate, average deferral, and the percent who sign up for a model portfolio or target date election. Then regularly evaluate progress on each of these measures.

One effective benchmark target is 90-10-90. Plan sponsors should seek to enroll 90% of eligible employees in the plan, participants should save an average of 10% of their salary, and 90% of participants should adopt one of the model portfolios or target date funds offered as part of the plan.

Beyond these participation-related statistics, many plan sponsors may look to measure other information related to their employee’s financial health. Employees who improve their financial wellbeing may experience reduced stress and improved productivity. Overall employee turnover may be lower. In addition, aging employees who have planned effectively are able to retire on time. This can have a significant effect on employee health care costs as aging employees who are unable to retire may incur higher health care expenses. Lastly, a reduction in loans against plan retirement accounts may reflect progress in participant budgeting and debt management.


Financial Wellness Education is an important component of the success of any qualified retirement plan. Plan sponsors need to recognize that there is no one-size-fits-all education program. Each participant population will have its own needs and plan sponsors need to customize education to address the most pressing issues facing their own employees. Investing in financial education can have important human resource benefits including increased employee retention, improved productivity and on-time retirement.

This information should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The commentary provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Bronfman E.L. Rothschild, LP cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. Past performance does not guarantee future results.
Bronfman E.L. Rothschild, LP is a registered investment adviser (dba Bronfman Rothschild and Bronfman Rothschild Plan Advisors). Securities, when offered, are offered through an affiliate, Bronfman E.L. Rothschild Capital, LLC (dba BELR Capital, LLC), Member FINRA/SIPC. © 2018 Bronfman Rothschild