It’s clear people are stressed, but even before the coronavirus pandemic created global economic uncertainty, most average Americans were living paycheck to paycheck.
In fact, roughly 30% of U.S. workers said an unexpected expense of less than $500 would make them unable to meet their financial obligations, according to an internal survey by Ceridian.
Increases in income inequality in recent years have been a major contributor to this financial strain, according to research from the Center on Budget and Policy Priorities. A number of elements have exacerbated this issue, including exorbitant health care costs that have exceeded inflation for many years; higher adoption of automation and outsourcing; a tax system that favors investment income more than wage-based income; and the slow erosion of defined-benefit plans offered by employers.
However, there is an opportunity in waiting for the financial services industry.
Access to quality talent is critical for the long-term success of many firms within the sector, and attracting and retaining talent is becoming increasingly difficult as newer, in-demand skillsets are relatively scarce.
Leading from a financial wellness standpoint is one area where financial institutions can gain an edge over their competitors in other sectors from a talent perspective.
By definition, financial services firms are experts in providing products and services people need to ensure financial stability. Extending this expertise into their talent acquisition strategies — and marketing it well — can give the sector a recruitment advantage. Here are a few examples already at the industry’s fingertips.
Banks can offer loan consolidation and forgiveness programs similar to what they’re already offering to customers. For example, enable employees to transfer portions of credit card recurring balances that are accruing at high interest into lower-cost, employer-subsidized personal loans with rates in the single digits. These could also have an employer match feature, which would resonate with many workers and result in significant savings.
Financial firms can also offer an on-demand pay solution giving employees immediate access to earned wages at any point during the pay period through a digital account on their mobile device, with little to no added cost.
The flexibility in employees being able to access earned wages ahead of the next payday with an on-demand pay solution means workers can better respond to unexpected circumstances, reduce reliance on high-cost payday loans and have more control and oversight over personal finances.
For employers, an on-demand pay solution creates minimal disruption within the existing payroll process and cash flow, while supporting employee financial wellness. It also improves employer brand perception.
Another example is adding the robo-adviser concept to open enrollment. The use of robo advisers is an emerging way to efficiently and cost effectively manage investment portfolios, but it’s often only dealing with a limited view of one’s overall financial wellness.
It has no visibility into debt levels or medical costs, and limited understanding of the tax picture. A robo adviser optimizes the allocations and risk/return profile for money set aside in the portfolio, but it can’t advise on how much should be going into the investment account in the first place.
Using an opt-in employee assistance program from a third-party fiduciary adviser to help navigate open enrollment, coupled with a downstream robo adviser to help allocate dollars allocated to retirement plans, would provide some semblance of a financial plan that is otherwise nonexistent for the majority of Americans.
This concept will likely emerge as a standard or opt-in offering as part of an all-encompassing open enrollment program. Such a program provides a holistic view of the employee’s tax, retirement, medical and financial-related matters, and makes artificial intelligence-based recommendations accordingly across all benefit choices.
Financial stress impacts the workforce in several significant ways: from the daily anxiety carried by the workers themselves to the impact it has on productivity, engagement and the bottom line of employers.
As such, financial wellness programming and benefits should be top of mind for employers looking to attract the best and brightest. And financial services firms should take note. It’s a massive opportunity for the sector to gain an advantage in attracting talent.