Financial wellbeing needs a health warning

The research is clear: your financial wellbeing is very closely linked to your mental and physical health.

If you’re struggling to manage your money, you’re more likely to have mental health problems, back problems, heart problems, high blood pressure, and so on.

And that relationship goes the other way, too. If your mental and physical health are poor, you’re likely to find it more difficult to manage your money.

Most employers now invest in mental and physical wellbeing. It’s only natural to include financial wellbeing as part of that too. The problem is that delivering an effective financial wellbeing programme is hard to do, and easy to get wrong.

Weighing up the risks

One risk is that employees ask why the company is trying to help them manage their money, instead of just paying them more. They might feel the company is putting the onus on them to solve the problem, when that responsibility should sit with the company.

Employers can also take a lot of heat from unions and employee advocacy groups for the same reasons.

A second risk is that employees get badly advised or products or services are mis-sold. Even though, technically, the employer might be at arm’s length from a team of external advisers, from an employee’s perspective, it was the employer who brought them in.

Wellbeing advisers and benefits providers are in it to make money, after all. For example, they might offer debt consolidation through payroll.

Payroll loans can be compelling products for people with low credit scores who can’t borrow money from a bank and are forced to turn to high-interest lenders instead.

But even products that exist to help employees with their financial wellbeing are designed to make money. Lenders make a judgement on whether an employee is going to pay back that money, and they’re going to attach an interest rate to that judgement.

Third, there’s the risk of what to do when an employer finds out their employees’ true state of financial wellbeing – or lack of it.

Say, for example, an employer asks some pointy questions:

• Do you feel comfortable with managing your money right now?
• Have you got money set aside in case of an emergency?
• Are you saving for retirement?

What does the employer do if they get worrying answers to those questions from some or all parts of their business? They need to do something. The ‘Pandora’s box’ has been opened.

It takes time and money to address financial wellbeing issues. The whole business will need to buy in to it. Any new digital products will need integrating into existing systems, handling sensitive data securely so that they can give useful insights.

That involves technology teams, compliance, risk, and privacy assessments. None of this stuff ends up being simple to do.

A good example of a potential solution is Nest’s ‘sidecar savings’ – an attempt to help people build up that emergency pot of money. This simple opt-out experiment had great results – an example of employees being helped in a practical way.

Guidance and platforms for financial wellbeing

There is much discussion currently around the advice-guidance boundary. Employees don’t generally want to pay for financial advice, but many of them could be getting high quality guidance instead.

They want to talk to someone – that person doesn’t necessarily have to recommend a course of action.

One-to-one conversations are difficult to do at scale, even remotely. The alternative of group sessions or webinars can mean relying on employees to recognise that they themselves have a need that needs to be met, and then to find time out of their own schedule to attend.

Another busy area of the industry has been digital platforms for financial wellbeing. A lot of employers and providers are including one platform or another, and they can help employees to see how their pay, benefits and wider financial life connect.

However, they don’t do everything. For an employer to do financial wellbeing well, they could end up interacting with four or five different suppliers. That’s a lot of work – and it can be expensive.

Talk about it

There is no clear answer to how to get financial wellbeing right as an employer, but one thing that can really help is building a culture where it’s okay to talk about it. Without that, employees are less likely to come forward with issues, attend a webinar, or use a digital tool.

People might feel that their financial situation, questions, or insecurity, could be used against them at work. If the company has a culture that breaks down the stigma of talking about money, that can be very effective in helping people take the right steps.

It’s particularly important to remember that financial problems can happen to anyone, not just people from certain socioeconomic groups, or with particular personalities or spending habits.

So much of it comes from events outside your control. Separation, divorce, illness, death in the family: it is difficult to plan for these situations.

A workplace that supports people when things like these happen is a workplace in which people are more likely to manage the financial consequences successfully.

Simon Grover is a director at Quietroom