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Financial Wellness: Where Is It Going?

Today, financial wellness solutions seem to be sprouting up everywhere, with questions (both business and legal) coming from all corners of the benefits industry.

Not a day goes by without a article or study on how important financial wellness is, how it is a priority for a number of employers, or how the industry is focused on addressing participant wellness.

There is little disagreement that financial wellness is of increasing importance to employers and their employees. Years ago, many employers offered defined benefit plans. Now, a majority of these plans are already or are on the way to being frozen. As I talk with many plan sponsors, I see a new concern — retire in place (or “RIP” for short). RIP means that employees who may want to retire may feel that they can't — they worry about medical costs and their fiscal longevity. The benefits industry has responded to these concerns in many ways. Examples of these responses include “through” TDFs, lifetime income solutions, decumulation strategies, and financial education to address the risks created by RIP.

So where does financial wellness go from here?

First, from a legal perspective, there are numerous legal considerations to evaluate based on the specific product being designed or offered. Often, legal considerations can be addressed proactively, utilizing practical solutions that create positive and useful results for employees, plan fiduciaries, and plan sponsors. The key is making sure that the relevant “i”s are dotted and the “t”s are crossed. While the DOL is friendly to wellness solutions, missteps still hold the potential for legal compliance headaches.

Second, more and more creative tools will continue to come to market. Much like robo-advisors, we will continue to see a full range of options in the marketplace that range from pure automation, to human intervention on top of automated tools (similar to some of the financial reporting consultants already provide), to one-on-one human services. Importantly, the human element shouldn’t be understated. From in-house HR departments to advisors and other service providers, each of them has a role to play.

Third, new market segments will emerge. As the DOL fiduciary regulation changes the business marketplace, financial wellness could directly impact service provider business models. This disruption creates opportunities for both new solutions for employers and their employees and new service models for those advising employers and employees. These new solutions and service models may be educational in nature, advisory in nature, or a combination of both.

Financial wellness offers a lot of benefits and opportunities for the entire benefits industry — whether a plan sponsor, plan fiduciary, advisor, or other service provider. While some opportunities will be turnkey, others will involve a degree of customization. The key is finding the right mousetrap to address the needs of employees, plan sponsors, and plan fiduciaries in this expanding corner of the benefits landscape.

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