Financial Wellness & Behavioral Finance

Transcription

1 Financial Wellness & Behavioral Finance ALI PAYNE & MIKE LEVIN 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS

2 Evolution 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 2

3 Evolution of Wellness 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 3

4 Evolution of Retirement 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 4

5 Total Wellbeing We view Wellness/Health Management as a true employee value proposition; Total Employee Wellbeing. Physical Health Social/Emotional Health Financial Health Career Health Community Health 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 5

6 State of Wellbeing in the U.S. PHYSICAL COMMUNITY FINANCIAL SOCIAL PURPOSE Having good health and enough energy to get things done daily 12% 56% 33% Liking where you live, feeling safe, and having pride in your community 15% 47% 38% Managing your economic life to reduce stress and increase security 23% 38% 39% Having Supportive Relationships and love in your life 16% 43% 41% Liking what you do each day & being motivated to achieve your goals 16% 48% 37% Suffering Wellbeing that is low and at high risk in a particular element Struggling Wellbeing that is moderate or inconsistent in a particular element Thriving Wellbeing that is strong, consistent, and progressing in a particular element Source: Gallup Well-Being Index Jan. 1-June 23, ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 6

7 Global Stress Epidemic KEY SOURCES OF STRESS Money Work Family Relationships 71% 69% 55% 51% Source: The Cost of Stress in Your Organization, MeQuilibrium The health epidemic of the 21 st century. World Health Organization 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 7

8 Definition Financial wellness is the balance between having a healthy state of well being today while preparing financially for tomorrow. It is not necessarily about being wealthy, but it is a state of psychological well being in which one feels they have control over their current finances and financial future ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 8

9 Financial Wellness Improved Financial Wellness Includes Informed decision making Effectively Managing Your Economic Life Learning to use credit wisely Discovering how to responsibly save Planning for the future Poor Financial Wellness Negatively Affects Other Areas of Health Social/Emotional Wellbeing Career Wellbeing Physical Wellbeing Community Wellbeing 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 9

10 Total Wellbeing We view Wellness/Health Management as a true employee value proposition; Total Employee Wellbeing. Physical Health Social/Emotional Health Financial Health Career Health Community Health 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 10

11 Evolution Continued 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 11

12 Workforce Segments 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 12

13 Optimize Engagement Gen Y/Early Career Expects technology Prefers multiple focal points in presented information Needs guidance and structure Gen X/Mid-Career Prefers summarized, visually appealing information Seeks advice of peers in similar life stage Late Gen X/Boomers/Established Career Prefers practical and factual information Prefers individual attention Expects to be asked for feedback Standard Templates Customizable Materials Original Strategies 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 13

14 Define Plan Philosophy Retirement Readiness Participant as Priority Plan as Differentiator Basic Protection Plan as Commodity Fiduciary as Priority Plan Health Basic Tools 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 14

15 Measurements of Plan Success Funding Investments Participation Old: Average deferral rates & balance Old: How many participants are invested in specific investments? Old: How many employees are enrolled and participating in the plan? New: Average income replacement ratio New: Are participants appropriately diversified to meet income replacement targets and tolerance for risk? New: How many employees will be able to actually retire comfortably based on income replacement benchmarks? 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 15

16 Workforce Distribution 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 16

17 Generational Differences Generation Y Plan on retiring, focused on living expenses Debt burdened by student loans & credit cards Generation X Don t know when they will retire, do it myself mentality Projected that 19 million will not be ready for retirement Boomers Working longer and working in retirement is probable Projected that 32 million will not be ready for retirement Source: Based on US census data combined with findings from the 2010 Employee Benefits Research Institute Retirement Study 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 17

18 Paychecks Remaining Age 25 Age 35 2,080 1,560 Age 45 1,040 Age 55 Age ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 18

19 How much is enough? Age Group Average Compensation Ave Account Balance Under Age 30 $40,000 $14,438 Rule of Thumb $50,000 $67,263 $50, $70,000 $150,074 $210, $80,000 $255,437 $400, $90,000 $330,149 $720,000 Retirement Rule of Thumb % of current salary saved 35 Year Old = 1 year of salary saved 45 Year Old = 3x current salary 55 Year Old = 5x current salary 67 Year Old = 8x current salary September 12, 2012 San Francisco Chronicle 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 19

20 What s wrong? 52% say they don t have the time, interest or knowledge to manage their 401(k) portfolio properly 73% spend less than eight hours per year managing their 401(k) plan account 56% don't review planrelated education materials Source: SHRM Online Stephen Miller May 10, ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 20

21 Risk: Stress from lack of savings & debt 60% 50% 51% 40% 44% High debt stress 30% 20% 31% 29% 27% 23% Low debt stress 10% 0% 15% Muscle tension Headache Severe anxiety Ulcers or digestive tract problems 4% 8% Severe depression 4% 6% 3% Heart attacks Source: Met Life 8 th Annual Study of Employee Benefits Trends. Findings from the National Survey of Employers and Employees, ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 21

22 Aging Workforce - Inadequate savings According to Fidelity s annual study, a 65 year old couple retiring in 2012 is estimated to need $240,000 dollars to cover medical expenses in retirement -This calculation does not include any costs associated with nursing home care and applies to retirees with traditional Medicare insurance coverage 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 22

23 Reality: How Much is Enough? Social Security Employer Sponsored Plans Sum of All Sources of Retirement Income Gross Pre- Retirement Income Replacement Ratio Georgia State University study benchmarks replacement income ratio at of gross pre-retirement income 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 23

24 Stress & the Workplace STRESSED PEOPLE ARE: Less likely to eat healthily Less likely to exercise More likely to fail at weight programs Get half as much sleep 30% 25% 200% 50% Source: American Psychological Association (APA) 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 24

25 Four Key Factors: Traditional Wellness Vs. Total Wellbeing They do not address the barriers that keep employees from engaging in or achieving sustainable wellness goals. They are ineffective in attracting the people who account for the majority of health claims. They often focus exclusively on fitness, weight loss, and smoking cessation. If there are underlying behavioral issues, incentives will not work for the long term. Source: American Psychological Association (APA) 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 25

26 Financial Wellbeing: Splurges The Building Blocks To Healthy Finances Saving For Other Goals, Investing, Estate Planning Insurance, Baying Off Good Debt Retirement Savings, Paying Off Bad Debt, Emergency Fund 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 26

27 Financial Wellbeing: Three Numbers Everyone Needs To Know 1.) Retirement Crunch Your Retirement Number How Much Is Enough? Could You Increase Your Contributions? 2.) Debt How Much Do You Really Owe (Total)? Determine What Debts To Pay Off First Explore New Payment Options 3.) Emergency Fund Do You Have A Plan? How Much More Do You Need? How Will You Get There? 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 27

28 Smartphone Apps/Fitness Devices 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 28

29 Evolution Continued 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 29

30 Thank You 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS