You have challenges and you’re looking for solutions. And that’s especially true for workplace financial benefits. Your employees have their own set of goals and trust you to help them along their path. What makes a difference? How do you support them through inevitable economic changes?
On this podcast, we’ll talk about what we’ve learned from the past. And how you can provide your organization with some much-appreciated clarity and education around workplace financial benefits.
This is Invested at Work.
Aaron: A good program lets the employee go down the path that they choose for themselves, but then also starts nudging them a little bit by saying, hey, don’t forget about this. Because what most programs want is for employees to have holistic financial wellness. Not to just be a really good saver, not to be a really good investor, not to be really good at paying down your debt, but to have all of your financial life in order. That’s the thing that most programs are striving for.
Rodney: The workplace financial benefit needs of employees continue to evolve, and that is especially true when it comes to addressing the financial health of today’s workforce. But what does a financial wellness program look like when it’s treated as mandatory instead of optional? And how can you help your team view it as a necessary part of doing business? To talk about where financial wellbeing has been and where it’s going, I am pleased to be joined by Aaron J. Harding, the head of financial coaching for Morgan Stanley at Work. Aaron has a long history of developing and implementing human and tech powered financial coaching systems and tools.
Aaron, welcome. I’m so excited to have this conversation today. But before we get started, my very first question is, if I were to go out on the street and ask 20 different people, “What’s your definition of financial wellness?” I’m sure I would get 20 different answers. So I want to start with how do you personally define financial wellness for yourself? And then I have a few follow-ups to that.
Aaron: That’s a good question, Rodney, because over time my definition of financial wellness has changed. When I was much younger, my definition of financial wellness was to make sure all my bills were paid on time. The rent was paid, the car note was paid, and I had money to go hang out on the weekend. Now it’s a little bit different. Now I’m at a stage of my life where my kids are in college and still working their way through. I’m thinking about retirement. I have a mom who’s getting older and going to need some support.
And so financial wellness to me, personally, is being able to manage all of those things without bankrupting myself either financially or emotionally in the process.
Rodney: Yeah, I understand that. And it’s interesting how it evolves over time. And when we also look at financial wellness from another perspective, say the perspective of employees versus employers, are there any differences in how employees today define financial wellness versus how their employers define financial wellness?
Aaron: Massive differences. So let me take a step back for a second. Employers, until about five or six years ago, when they thought about what was the equivalent of financial wellness, it was really around financial literacy and making sure people knew what to do with the 401k plan. They knew what the investments were, they knew how to put together a portfolio, they knew what rebalancing was, et cetera. When the term financial wellness came about, employers started looking more broadly, but they’re still looking at it, in my experience, from a product-centric focus. So employers are thinking, I provide a 401k and I provide life insurance and I provide this pet insurance and I provide an HSA.
Employees on the other hand, think of financial wellness differently. They’re thinking of it as, of course, can I pay my bills and things like that. But they’re really thinking, am I able to meet my financial obligations today, save for tomorrow, and do it in a way that doesn’t cause me an inordinate amount of stress? So am I able to make progress on paying down my credit card debt, for example? Am I able to contribute to my retirement plan to get whatever match happens to be available to me? And then more importantly, is what I’m doing today going to be enough for me to live the kind of life that I want to live in the future?
And I think that disconnect between the product side and the lifestyle side is probably the biggest difference I see between the way the two groups are defining what financial wellness is.
Rodney: I like the way you put that too. Because if I’m an HR lead, if I’m a plan sponsor, if I’m a stock plan admin, I’m focused on financial wellness as a product. But financial wellness is living and breathing in the lives of employees. And that dichotomy between those long-term needs that employers are focused on and the employees on the short-term needs, makes a lot of sense where there could be that, as you said, a disconnect.
Have you seen some examples of employers coming to that realization, coming to that moment of saying, “Wow, I now realize there is that disconnect there?” And what happened next?
Aaron: I’ve worked with several companies over the years, and one of the things that I’ve noticed is that those companies that have made the connection have come to it almost in a backdoor way. So one client that I had worked with in the past, who ended up with a really robust financial wellness program that focused on getting people to do things and take actions in addition to learning, they came to that because they were initially focused on the health side of things. And their physical wellness program had a variety of participants who were saying, “Look, I run triathlons in my spare time, so I don’t need to do a step challenge or whatever physical thing you’re doing. I know what my biometrics are, probably even more so than what this program is going to offer. So what else can I do?”
And that’s when they started thinking about a financial wellness program. And when they came in and started thinking about it, originally it was focused primarily on education and assessments and those kinds of things. But what they ultimately learned was that by listening to their employees and asking their employees, what do they like about the program, what would they like to see changed about the program? Getting that direct feedback from them is what ultimately led them into a really, really solid financial wellness program.
Now again, they didn’t just get there, they got there over time. And I think that that’s one of those things that I’ve found to be common among all employers who really get it and get there, is that it happens in steps. The employers who go out and just implement a program for the sake of implementing it and checking a box, they don’t often get there. Because they checked the box, I have a program, however they’re defining it. But those employers who say, we really want something that our employees are going to engage with and use and find value in, they’re asking their employees and constantly accepting feedback and making changes along the way.
Rodney: I love that you said that, because it really is an iterative process. So what are some of those trends that we’ve seen evolve over the past couple years when it comes to employee financial wellness?
Aaron: I think some of the key trends that we’ve seen have related to how people are responding to the pandemic. So think about it this way, pre-pandemic, we all went to work. We had daycare and after school programs and all of those things that worked out fine. And our family, we worked within that paradigm and that ecosystem that we had built for ourselves. But what happened during the pandemic? In the early days at least, we couldn’t go to work. Our kids couldn’t go to school. Many of us who were single or lonely and went out and bought puppies, and then now … we worked from home. We didn’t have to commute, we didn’t do any of those things. And now we have to deal with all of the decisions we made during the pandemic, or the decisions that were made by others.
For example, thinking about work from home versus going into an office, there are financial implications to us going into an office. Now, there are absolutely benefits to going to an office, like the camaraderie that you can develop and the training that can be imparted on the more junior staff as they’re working side by side with someone more senior. But on the other hand, I now have to pay for my commuter pass, which I haven’t had to pay for two and a half years. And I hate to tell folks, but when a bill goes away for an employee, they don’t take that money and just start putting it in the bank. They find something else to spend it on.
Rodney: That’s shocking, Aaron. I cannot believe that.
Aaron: I know, right? And so now I have to find the money to pay for my commuter pass again. If I’m one of those people who didn’t have a puppy pre-pandemic and I got a puppy, now I have to figure out what I’m going to do with the puppy. Am I going to have to pay a dog walker? Am I going to pay for doggy daycare? I have to think about all those things that I just really wasn’t prepared for. And one of the other trends is, we know that we’ve heard a lot about student loans and people being saddled with the burden of student loans. And during the pandemic, there’s been, of course, the moratorium on payments on the federal loans. Well, that money’s also been redeployed into something. And at some point someone’s going to have to pay back a student loan and they’re going to have to figure that out.
So when we think about the trends that are taking place now, I think it’s really around people saying, “Oh my goodness, the world is reopened. How do I reallocate my budget to get back to a place where I’m able to manage my finances, have some extra cash left over at the end of the month, and I’m in an environment where a dozen eggs cost me seven or $8?”
Rodney: I want to talk about the resources within a financial wellness program for a moment. Some of the things that employers are looking at implementing are financial coaching, financial planning with a financial advisor, but there seems to be some confusion as to who does what and what is the value.
So can you talk a little bit about financial coaching versus financial planning? What is it? What are the similarities, what is the difference? Even what populations are best suited to one or the other?
Aaron: In my experience, the major difference between a coach and an advisor is this. A coach’s focus is on teaching someone how to manage their money better. And an advisor’s focus is on implementing plans and providing products and services that help people achieve their goals. So when you think about who’s best suited for which, it’s not about level of wealth. Because there are plenty of people who have fairly good incomes, who are horrible with their money, and might benefit from working with a financial coach. Oh, you have more month at the end of your money.
Well, how do we manage that? Let’s talk about your budget. Let’s figure out what you’re doing, how you’re spending it. And find some ways to change things that are going to work with your lifestyle, but also allow for you to get closer to your goals instead of further away from them. So the coach is there to teach people and get them prepared to move forward. And then when they’re ready to move forward, most people who work with a coach would benefit from working with an advisor on that implementation piece.
Rodney: You said something that I think is very key right there. That coaching versus working with an advisor is something that regardless of income, regardless of wealth, may be appropriate to you. What are some other misconceptions when it comes to financial wellness, from both the employer and the employer perspective?
Aaron: One of the big misconceptions that I’ve seen with employers is that they believe that financial wellness as a program is something that they can offer the way they do other benefits. For example, you have an annual enrollment where a person chooses their healthcare plan, and then you don’t hear about your healthcare plan until the next annual enrollment. Financial wellness is different in that it is something that people don’t necessarily hear the messaging until it’s relevant. Now, if I were to walk out of here and twist my ankle, I know I’m going to have healthcare, right? I don’t need a prompt to think about that. I’ll go to an urgent care and I’ll give them my card and I’ll pay my deductible.
But with financial wellness benefits, when I go out to buy a car, for example, and the salesperson presents me with numbers for a lease versus a purchase, how do I make that decision? I don’t even know the difference between them other than the fact that one monthly payment is lower or higher than the other. So who can help me to understand that in the moment? That’s the thing, in that I don’t even think to call whoever provides my financial wellness benefit and speak with a coach, for example. That’s another really big miss I think, from an employer’s standpoint. Is that employers believe that they can just put this out there, hang a link, hang a phone number, and the program is just going to do its thing, when in fact, it’s not.
I think another misconception that I’ve seen on the employee side is that employees call into speak with a coach, not realizing that a coach doesn’t provide advice. A coach provides that education, a coach can provide some guidance, but a coach isn’t going to say, “Invest your money here.” That’s the job of a financial advisor. And so as a result, there are some participants who call in expecting one thing and not getting what it is that they want. But here’s the kicker. For those people who call in looking for one thing, it’s often the case that what they really need is something else.
So for example, back when I was on phones and I was actually doing day-to-day coaching with folks, a guy called me up and said, “Should I invest in this renewable energy stock?” I said, “I don’t know. What do you know about renewable energy?” And he’s like, “I just heard from a guy that this would be a really good stock.” So then I start talking to him and I say, “Okay, well what is it that you’re trying to do? What is this money for?” “Well, I want to buy a house in a few years.” So think about what you’re trying to do.
And as we had conversation and went a little bit deeper into it, it turns out he really wasn’t someone who needed to invest in that kind of renewable energy stock. He was someone who needed to understand what a money market fund was because he was going to use that money in three years, four tops. And a really good coach is going to answer their immediate question, but help dig deeper and get to what’s really important that’s going to move the needle in their lifestyle in a meaningful way.
Rodney: It’s almost like a coach also is a financial therapist, in a way.
Aaron: Absolutely. Absolutely. I mean, I will say that in my days as a coach, there were many times when fears were expressed by the people I was working with and tears were shed because in reality, our money is an emotional thing for us. I tell people that my father was the cheapest man I ever met, other than my grandfather. So he got it from learning with his father. And when I was a kid, and I would ask … I’m going to date myself a little bit here. But growing up in the early 70s when I would ask for a quarter for a bag of chips, I would have to explain why I needed the chips and what I could do to work to earn the quarter, and all these things.
You learn about money as you are growing up. And so I now have a particular relationship with money where I think my kids would probably say I’m the cheapest person they ever met, because I don’t give it up very easily. Now, over time though, I think that one of the things that a good coach will help someone do, and we’re not therapist therapists, but we tend to find that people who are involved in coaching are teachers at heart.
Rodney: And going into that mind shift, a lot of times it’s passed down from generation to generation, like you talked about with how frugal your dad was.
Aaron: I didn’t say frugal, Rodney. I said cheap.
Rodney: I was trying to be polite. Cheap … your dad. And how you’ve inherited some of that. When it comes to financial wellness programs, what is the value not only to the employee, but the impact and value to the employee’s family?
Aaron: Think about it this way. When you look at studies on what causes people stress, what causes relationships to end, what causes unhappiness for people, finances are typically going to be in the top two. So think about carrying around all that stress in your day-to-day life and the impact that that has on your interactions with those around you. Your colleagues, your employer, your children, your friends, everyone who is around you is going to have some impact as a result of you carrying around that stress.
So when you think about what financial wellness programs do at their heart, is they try to relieve some of that stress so that they can improve their overall relationships with themselves, with others.
Rodney: And also financial stress impacts their work.
Aaron: Oh, absolutely.
Rodney: How so?
Aaron: Well, again, think about it. If I’m stressed out because I have debt up to my eyeballs, or I’m delinquent on debt and I’m getting constant text and phone calls from my creditors, how much attention am I really paying at work? We know that there are studies that have been done by other organizations that have cited people spend more than five hours a week thinking about their finances when they are experiencing financial stress.
Well, that’s five hours a week where I’m not devoting all that I can to my employer and the job that they’re paying me to do. So my productivity is going to be down. My interaction with my colleagues might be down. And worst case scenario, my interaction with my employer’s customers might be negatively impacted because I’m dealing with that stress.
Rodney: Yeah. And affect the bottom line of the company.
Aaron: Absolutely.
Rodney: Yeah. Now you’ve been involved in the implementation of a number of financial wellness programs and financial coaching programs and planning programs over the years. Can you share what are some practices for implementing a financial wellness program, and where you’ve seen some missteps?
Aaron: How much time do we have? So the short answer is I think the best best-practice is to make sure you have a strategy for your program before you do anything at all. So there are many organizations that I’ve experienced where they’ve said, we want a financial wellness program. They issue an RFP, go out to vendors and say, “Tell us about your financial wellness program.” They hear some really good presentations and they say, “I want that one.” And then they go to implement it and they say, “Whoa, how does this fit with everything else that we’re trying to do?”
So having that strategy up front that lets you know what your end goal is and what you are trying to do with the program, how it fits with everything else the organization is doing … which includes some of the other non-financial benefits that are being provided by the organization. How does all that hang together in a strategy, is the very best best-practice that I have to offer your audience.
Rodney: So it’s about synergy? And making sure that it all aligns with the overall objectives of offering your workplace financial benefits?
Aaron: Absolutely.
Rodney: Now, when has it not worked?
Aaron: Couple of things. So one thing that I’ve seen is that an employer just may not understand their employees very well. I worked with an employer once where we had a digital product. And the employer was saying, “Well, we don’t have emails for a lot of our employees.” And they’re not on computers all day because it was a manufacturing client. And I said, “Look. Well, this digital portal isn’t going to be a way to engage them.” But in reality, the vast majority of employees had a cell phone in their pocket. And on those smartphones, they were on websites and in apps and looking at all kinds of digital content. So why not, in this case? But there was a misconception that because they don’t use a computer on the job, then they won’t use a digital device for something related to their wellness, which turned out to be false.
Another thing I think that is related to that is about making sure that you know your employees well enough to communicate to them in a way that works for them. Some employees, you have to send something to the home or else they just won’t see it. Some employers send so many communications, that anything that’s internal, employees just block out. So by sending that thing to the home, you have the opportunity for a spouse or partner to see it and say, “Hey, what is this thing?” And that then provides an opportunity for the employee to engage.
Communication tends to be one of those linchpin things for financial wellness programs. As I’ve said earlier, and I’ll pound the table on forever, it’s a critical thing to ensuring that they have success. And for employers who don’t do it well, who silo the communications and don’t wrap it in everything else that they’re doing from a benefit and financial benefit standpoint, I think they have missed the mark a Little bit in the opportunity that they have before them.
Rodney: Where does the role of assessing your employees financial wellness needs come into play? And there are all types of ways to assess financial wellness data, can you talk a little bit about the role assessment has or plays when determining the best path forward for financial wellness program?
Aaron: Sure. I won’t say that there’s always a best path forward for the program. And that’s one of those things that companies have done well in implementing a program, is understanding that there’s not one best path for a program, that there may be multiple best paths for the different constituent groups within the organization. But to your question around assessment, it’s important to understand where you are in order to figure out that path that you should follow to go forward.
What’s most common now is that individuals will go in and do an assessment, and many of the digital solutions is designed to take a pulse check on where the participant is at the time, so that employee can say, “All right. I’m doing well here. I need some help here.” So they can focus their time and energy into the places where it makes the most sense for them, depending on their goals.
So a good program lets the employee go down the path that they choose for themselves as identified based on their assessment answers, but then also starts nudging them a little bit by saying, hey, don’t forget about this. Because what most programs want is for employees to have holistic financial wellness. Not to just be a really good saver, not to be a really good investor, not to be really good at paying down your debt, but to have all of your financial life in order. That’s the thing that most programs are striving for.
Rodney: Yeah, that makes sense. And like you said, there is no one best path forward. It really depends on your workforce, your company structure, your employees, the benefits that you already have in place. There’s so many factors that can go into that.
Now, financial wellness has been an employee benefit for a number of years, but I want you to put your crystal ball in front of you right now. What is the next evolution when it comes to financial wellness? What’s financial wellness 2.0? Where do you think it’s heading?
Aaron: That’s a really interesting question. And it’s something that, as you might imagine, I think about fairly often. I’m a tech person, and so when I think about the power of what AI can do and thinking about how we do the things we do as it relates to our money, the world is just an amazing place when you think about what that could be. Taking the ability for an AI solution to tailor a portfolio for a person based on their specific goals, time horizon, a really, really minute level of detail around what their risk tolerance is, et cetera, I think that’s something that’s going to become the future of financial wellness. It’ll change … 15 years ago, financial wellness was purely financial literacy. This is what a stock is, this is what a bond is, this is what an asset allocation is. And it evolved over time to include more conversation around not only what something is, but how it works and how it fits into your overall life.
I think that deep, deep, much further out evolution of the financial wellness industry as a whole, particularly as it relates to the workforce, is going to be around, how do we use all of these AI tools that are being developed to provide better, more tailored, more customized financial advice to a person so that they can achieve their goals? And it’s not just investment focused. You’ll plug in some information and the AI will pull your credit report and it’ll say, you have these debts, let’s work on them in this order. And then you can start saving this amount of money. $37.50 a paycheck should go into this particular investment. The AI is going to be able to pull it all together in a way that humans can do now, but like that.
Rodney: Yeah, that is fascinating to be able to see that. Taking of that, what happens today with humans and being able, like you said, to just quickly disseminate that information and come to those conclusions and those recommendations.
Couple of last questions. Key takeaways for those listening. Those HR leads, plan sponsors, stock plan admins. What would you like to say to them about financial wellness today and how they can deliver a more effective, perhaps financial wellness program to their employees?
Aaron: First takeaway is make sure you have a financial wellness program. And make sure that your program is the program your employees want by asking them what it is that they want. And then you can always attach some things that you believe they need, but if you don’t give them what they want, then it’s hard to get engagement. Have that strategy that strings everything together with your corporate goals and what it is you’re trying to do from an overall benefits perspective, from an overall financial benefits perspective, from an overall human capital perspective. Make sure that whatever program you implement, make sure that there is that synergy that you spoke of earlier among all of those things.
And then the last thing that I’ll say for organizations is, I said it earlier, communicate, communicate, communicate, early and often. If you have an internet, make sure that they’re a constant and evolving, revolving post there. In your email communications, in your newsletters, through mail, all the channels that you have available, make sure that there’s some element of financial wellness in those things so that your employees can understand, okay, the program exists. I’m learning some things. And you might catch them at the moment where they really need to learn something, and that’s when they’ll reach out to a coach or a digital solution for some additional education.
Rodney: Communication is key. My wife tells me that all the time. Has to send me a text in addition to verbally telling me something, and then I finally get it. Aaron, last question for you. What makes you invested at work?
Aaron: I didn’t grow up with a ton of money. We weren’t broke, there just wasn’t a lot for me. But as I think about this and as I’ve evolved in my career, the thing that gets me going to work, day in, day out is that I look at the state of the world we’re in, and I look at all of the isms that we are dealing with, racism and sexism and all of those things that are dividing us. And so I come to work each and every day trying to take more of the have-nots and help them become haves, so that they can do well and thrive in whatever environment comes next. So that they can prepare their children to do well in whatever environment comes next.
So when I think about the haves versus the have-nots, it’s not everyone should be a super wealthy person. That’d be fantastic. It’d be horrible for inflation, but it’d be fantastic if everyone was super wealthy. But I’m thinking about making sure that you have enough, you’re in enough of a have, to provide your children with the resources … if you have them. To provide yourself with the resources, that you don’t fall behind as the world moves past us. That’s what gets me out of bed every day.
Rodney: Excellent. Aaron, it’s been a pleasure speaking with you today. Thank you so much for joining me.
Aaron: Pleasure was mine, Rodney. Thank you.
Source: morganstanley.com
