Getting Started with Financial Wellness By: Mathew BarberAIF®, Gabriel PotterMBA, AIFA® 2019.02.20
The historical goal:  retirement

For any consultant, the client’s goals should determine the benchmark of success.  For example, a company with a defined benefit plan hires a consultant to help them divest the ongoing pension obligation which the company bears.  The pension consultant should be measured on their ability to guide the plan, through a combination of asset & liability analysis and prudent investment selection, towards achieving the company’s goal.  Alternatively, a charitable foundation might set a goal to exist forever, supporting their mandate (whether it’s addiction outreach, housing, education, etc.) in perpetuity.  In this case, the foundation’s consultant should be so evaluated based upon their ability to let the foundation thrive and support their mission as long as possible. 

For most individuals, the primary financial goal is retirement.  Similarly, investment consultants who work for defined contribution plans (i.e. 401(k) or 403(b)) typically align their plan evaluation towards the retirement-outcomes of plan participants.  That makes sense; retirement is an expensive proposition and planning for it benefits from professional guidance.  The laws surrounding investment consultants, both institutional and individual consultants, are often framed around providing good retirement outcomes.

Retirement is primary goal and end-point. For several decades, this singular approach went mostly unchallenged.

The new goal:  what is financial wellness?

Over the past few years, a new buzzword (technically, a buzz-phrase) “financial wellness” has entered the scene as an alternate approach to mere retirement planning.  What is financial wellness?  You might think of it as a more holistic and encompassing approach towards an individual’s financial well-being, including retirement, but also including other goals along their lifetime.

For example, imagine an employee – John Smith, age 60 – has $300,000 saved in his 401(k) retirement account.  While John has been narrowly focused on retirement savings, he has neglected to consider funding other large expenses.  For instance, John’s daughter is going to a prestigious Ivy League university and her tuition costs – $200,000 over 4-years – had been promised to her by her father.  Moreover, John had an unforeseen traffic accident, which incurred some health (and car-replacement) costs.  John’s insurance was inadequate and he is on the hook for another $50,000.  John is old enough to take money from his retirement account to pay for these expenses without early-withdrawal penalties.  On the downside, John’s nest egg has shrunk to a fraction of what he had hoped for. 

These outcomes could have been planned for, and significantly mitigated, using financial wellness techniques, rather than exclusively focusing on the balance in a 401(k).  Sometimes, it requires specialists of many types – independent financial planners, insurance agents, tax accountants, and estate attorneys – to get all the pieces together correctly, but it can be done. 

How do you measure financial wellness?

What financial wellness means for any particular individual will deeply depend on their goals.  In our previous example, John hadn’t specifically earmarked money for higher education costs or taken advantage of other funding (scholarships, loans) opportunities, so that’s certainly a goal he would have set.  Similarly, having a better handle on healthcare and insurance costs (health, auto, or otherwise) could have worked in John’s favor.  There are a variety of possible financial goals – reducing debt, owning a home, travel plans, creating an emergency savings buffer, estate planning, retirement lifestyle, or leaving a charitable legacy – which could all factor into one’s measure of their financial wellness.  

Where to get started with financial wellness?

We presume the benefits of financial planning are obvious to you, as an individual investor.  If you can bolster positive outcomes and alleviate negative outcomes, why wouldn’t you?  Moreover, we’ve found employers also have a clear interest providing financial wellness options to their workers; productivity measurably suffers and health costs rise when employees are stressed with financial concerns.   

So, where can you get started with financial wellness?  First, if you’d like to catch up on the topic, there are a variety of articles online.  We have a variety of content on the topic including, articles, blogs posts, and a podcast with our financial wellness expert, Mathew Barber.    

For our institutional clients, financial wellness was the topic for the Spring-2017 edition of our quarterly magazine, Confero.  There are a variety of articles which discuss the expansion of financial wellness services for employers to employees.   You can find the magazine on our website, or just click here:   http://westminster-consulting.com/Files/ConferoIssues/Confero-Issue18.pdf

Talk to us

We understand these articles are meant as general information and won’t specifically address your concerns and goals.  For more information specific to you as an individual or your business, contact your financial professional.  Here at Westminster Consulting, you can reach out to Matt Barber, and he can discuss financial wellness planning - either for your employees and retirement plan participants, or for you specifically. 
Mathew Barber

Mathew is a Senior Consultant at Westminster Consulting, where he is responsible for the firm’s personal advice and employee education programs.

Mathew leads the firm’s participant education and advice initiative, Westminster Workplace Solutions. Additionally, he develops and promotes Westminster...

More about Mathew Barber
Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

More about Gabriel Potter
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