Advice, financial well-being, and one thing my wife and mother can agree on
Fortunately, my mother and wife get along remarkably well. One thing they seem to bond over is my stubbornness and defensiveness, as they’ve each had to bear the burden of my character flaws for many years. I, of course, refuse to consider that they could be right, and take offense at the implication.
However, I’ll admit it’s possible that I have occasionally been a bit stubborn and defensive at the office. And one example may have been when the concept of financial well-being was starting to gain momentum several years ago. Immersed in defined contribution advice and managed accounts, I wondered whether “holistic financial well-being” was just an industry buzzword without real substance.
I’ve since come around on financial well-being
To help explain why, I talked with Nicole Panichello, a Vanguard colleague who specializes in financial wellbeing for retirement plans and their participants.
Nicole points out that employees don’t experience their finances in neat categories. Retirement savings, debt, emergency savings, health care costs, and big life events all overlap. “When participants hit key moments, they’re often overwhelmed and unsure what to do next,” Nicole said.
In fact, advice and financial well-being are not competing ideas. They are complementary approaches to help people make better decisions with confidence.
Advice and financial well-being are not rivals. Done well, they work as one.
Financial wellness versus financial well-being and financial advice
Nicole offers a helpful distinction. “Financial wellness is the tools, education, resources, and guidance that help people improve their financial health,” she explained. “Financial well-being is the outcome those efforts are intended to achieve.”
These outcomes such as more saving, fewer loans or hardship withdrawals, dedicated emergency savings, and stronger retirement readiness, are a vital first step. For many, personalized advice or managed accounts may be the appropriate next step when their situation becomes more complex, when they lack the time or confidence to manage decisions on their own, or when they simply prefer a more hands-off approach.
The questions plan sponsors are asking now
Today, as financial decisions become more diverse and complex, plan sponsors are asking broader questions than they would have just a few years ago. It’s no longer just, “How do I help employees save for retirement?” Increasingly, it is, “How do I help employees navigate their full financial picture?
Sponsors increasingly view financial well-being as both a retirement issue and a workforce issue. Financial stress can affect productivity, engagement, retention, and how employees use their benefits long before retirement. When employees feel more in control, they may be better positioned to focus on work, make progress, and feel supported by their employer.
Of course, this has created a crowded marketplace. To build an effective program, Nicole urges sponsors to focus on three key qualities.
Three qualities of a successful financial well-being program
The program should connect across the full financial picture
The program should be flexible enough to meet participants where they are
The program should drive action, not just awareness
Measurement matters too. Clicks and logins are useful, but they are only leading indicators. What matters most are better habits and stronger outcomes.
Cost is another consideration. Nicole notes that it’s important for plan sponsors to understand what is already available through their retirement plan relationship before adding another provider. At Vanguard, many financial well-being resources including digital tools, education, guidance, and expert support are available at no additional cost. Fees apply only if participants choose certain optional advice solutions that offer personalized guidance and ongoing discretionary management.
My Takeaway
My younger self was clearly wrong: advice and financial well-being are not rivals. Done well, they work as one.
Financial well-being solutions help participants build knowledge, confidence, and engagement, while advice and managed accounts provide deeper support when needed. Together, they can meet participants where they are and evolve with them throughout their financial journey.
Personally speaking, I should be a little more open-minded the next time a new idea gains traction that could evolve what I do or how I do it. And most importantly, I need to remember to thank my wife and mother for putting up with me.
