When I started Financial Finesse in 1999, financial education wasn’t even a term. It was two separate words, strung together. And, plan sponsors were worried about employees retiring early, flush with portfolios full of high tech internet stocks that were doubling and tripling in value on a regular basis, not to mention in the money stock options for those who were lucky enough to work in the technology industry. The paper wealth was mind-boggling.
Flash forward to 2012 and who could ever have imagined how life would have changed? Who could have imagined that financial education, the two words that weren’t even recognized as a term, let alone an industry, would become one of the most critical components of a company’s entire benefits offering?
Why has this happened? The answer is simple. In a relatively short period of time, companies, out of necessity, have dramatically changed how they manage their benefits. The responsibility for funding and managing benefits, once squarely in the employer’s court with fully funded Defined Benefits Plans, company subsidized health care, and generous insurance benefits, has been transitioned onto the employee. But, until recently, most employers haven’t put the tools in place to help employees effectively fund and manage their benefits. Couple this with a tough economy, where home prices have plummeted; investment portfolios have been volatile in the short term and flat over the long term; employees have been laid off, furloughed, or had to deal with cuts in pay or bonuses; and health care costs have sustained double digit increases each year, and you have a formula for some serious problems. Every single day, we get inquiries from companies grappling with the following issues—as a direct consequence of employees lacking the knowledge they need to make informed decisions about both their benefits and their personal finances:
- Delayed retirement costs, estimated at $10,000-$50,000 per employee
- Stress driving up health care costs by causing or contributing to over 75% – 90% of doctor’s visits and finances are the leading cause of stress
- Concerns that more employees will unionize due to dissatisfaction with benefits
- Increased ERISA lawsuits
To address market needs, financial education has evolved into 4 key practice areas—Financial Wellness, Retirement Preparedness, Benefits Planning, and Workplace Financial Planning, each of which is designed to address the most critical problems that have arisen from this situation, and best practices have been established in each area to help employers create effective programs.
This blog will address these practice areas and associated best practices so employers have a roadmap to follow in designing, managing and measuring results of the financial education programs they put in place. None of us could have foreseen how life would have changed from 1999 to 2012 (including the financial education providers who are writing this blog). As they say, hindsight is 20/20.
You can’t change the past, but, fortunately, one thing we also have learned in the last 13 years is just how well education works from the companies that have designed and deployed successful programs.
It’s not too late to change the future.
Liz Davidson, Founder and CEO of Financial Finesse
