One-Size-Fits-All Financial Education Missing the Mark

The financial education and wellness programs that employers are offering their workers are, for the most part, ineffective because they do not speak to each individual’s particular situation and motivate them to make a behavioral change, says Martha Brown Menard, senior researcher at financial wellness software provider Questis, based in Charleston, South Carolina.

“It’s challenging for employers to deliver personalized financial advice,” Brown Menard admits. “They have limited resources and opportunities for addressing a large population that spans multiple demographics and that are experiencing diverse life events and needs. And we know now that financial education alone doesn’t change behavior. It needs to be integrated into a more comprehensive approach to financial wellness.”

Financial technology is the key to delivering tailored education, Brown Menard maintains. “Financial technology holds a lot of promise and is just starting to deliver,” she says. “It’s possible to use existing technology now, and machine learning/artificial intelligence going forward, to deliver more personalized advice to meet people where they are. We know people are more motivated to take action when information presented to them is relevant to their immediate situation, with concrete suggestions on how to take action.”

This needs to be paired with access to financial advisers who can provide financial coaching, Brown Menard says.

“Ideally, financial wellness programs can be personalized by people, who can coach and encourage, and at the same time be fueled and scaled by technology,” she explains. “Coaching employs techniques that are consistent with the concepts and principles of effective behavioral change. A relatively new entrant to the coaching field, financial coaching differs from traditional financial advising in that it tends to focus more on client-centered goals to guide the process, rather than only providing specific expert advice or recommendations.”

This means setting goals, creating concrete action plans, building motivation and providing accountability, Brown Menard says.

In 2013, NeighborWorks America and Citi Foundation partnered on the Financial Capability Demonstration Project, which assessed the effectiveness of 30 financial coaching programs, Brown Menard says. The researchers discovered that more than one half of participants who had no savings before being coached had begun to save, she notes. Additionally, nearly two-thirds who had said they felt financially stressed no longer felt that way after going through a financial coaching program, she adds.

Chris Whitlow, chief executive officer of Edukate, another financial wellness software provider, based in Orlando, Florida, says his company’s offering asks participants what financial challenges they are currently facing, be it buying a home, starting a family, paying off student debt, or helping elderly parents.

“Once you understand what they are struggling with, you can inject the right benefit that the employer offers to help them with these goals,” Whitlow says.

Broadly speaking, Edukate has found that employers generally assume that saving for retirement is workers’ primary financial goal, but out of nine financial goals that Edukate’s software covers, retirement comes up as the fifth most cited goal, Whitlow says. “Only 10% of the population is focused first on retirement,” he says. “The majority are focused on paying down debt.”

“I do think that the majority of the [financial wellness] products that exist today concentrate on solving a particular problem, like retirement, or on providing an ideology behind financial wellbeing that stems from one perspective,” he continues. “We pride ourselves on having an open architecture platform in terms of the broad content we provide and benefits we can then talk about.”

Whitlow believes that broad-based financial wellness programs like Edukate can teach workers who are not financially vigilant what they should be asking about various financial goals, and in so doing, make them more comfortable about reaching out to an adviser. Otherwise, “while you can offer financial coaching, it is going to be difficult to attract an individual’s attention if they don’t feel comfortable where they are. Software programs where companies are creating broad-based gamified incentives to participate will lead workers to want to be coached or meet with a financial representative because they feel armed with the questions they need to ask to improve their financial situation.”