FINANCIAL FINESSE RELEASES Q3 RESEARCH ON TRENDS IN EMPLOYEE FINANCIAL ISSUES

Employees’ financial wellness improves, but still far from optimal.

Financial Finesse, the nation’s leading provider of workplace financial wellness programs, has released its third quarter research for 2012 on trends in employee financial issues. The report found employees’ financial wellness improved in most financial planning categories up to, and in some cases surpassing, 2011 levels. This comes after an impressive climb back from faltering wellness levels in the first quarter of the year.

Significant trends from the report were:

• Employees shifted their focus to short-term money management issues after several quarters of long-term focus. Budgeting and debt management questions made up over 30% of all questions received by the company’s team of CERTIFIED FINANCIAL PLANNER™ professionals, up from about 22% last quarter, and reaching levels not seen since Q3 of 2010.
•  This focus appears to be paying off, with improvements in all areas of money management and financial planning, most notably managing debt, living within their means, and setting up an emergency cash reserve. While employees are still far from where they need to be in these areas, the fact that they are actively focusing on improving their finances is a good sign, as is their quick recovery from the backslide they suffered in Q1.
• Investing climbed the ladder as a key priority in Q3, based on data collected from our financial wellness assessment tool. We believe this is due to recent market improvements, as well as employees realizing that they may have to invest more aggressively in order to reach retirement goals, largely to compensate for the fact that they may not be able to save more until they build a stronger financial foundation.

Financial Finesse founder and CEO Liz Davidson says these are all positive signs even though the shift of focus onto money management issues comes at the expense of retirement planning, which saw a drop in questions to below 30% of all questions asked for the first time in over a year. According to Davidson, this shift was overdue and very much needed, with Financial Finesse noting in a recent retirement preparedness research report that the lack of employees’ financial wellness was actually the biggest obstacle to their retirement preparedness.

Notes Davidson, “The reality is that beyond saving up to the company match, most employees will generate a higher return paying down high interest rate credit card debt than investing those savings in their retirement plan. Not only does the math support this, but when you consider the research on behavioral finance and what motivates employees to build and sustain positive financial habits, this is a much more effective way to build wealth than putting retirement savings first.” Greg Ward, Director of Financial Finesse’s Think Tank agrees, adding that, “As counterintuitive as it is, this strategy actually enhances retirement preparedness. Employees who follow it go into retirement debt free, with a higher net worth, strong financial habits and behaviors, a strong credit score, and a focus on living within their means.”

All that said, both Davidson and Ward caution that the recent improvements should be taken with a grain of salt, as employees are still far behind where they need to be in order to effectively prepare for retirement. Only 18% of employees report they are on track to replace 80% of their pre-retirement income (or their goal) in retirement, and Financial Finesse believes that money management problems are the reason why. Approximately 40% of employees still don’t have an emergency fund, over 25% report they aren’t making ends meet, and over 10% are in a state of crisis where they aren’t even able to pay their bills on time. Until employees address these foundational issues and dramatically increase the amount they are saving, they will be forced to delay retirement, or worse, be forced to retire with insufficient savings.

“These are still disconcerting numbers in an economy that poses increased responsibility for employees to fund their own retirement,” says Davidson. “We are encouraged by the recent improvements, but no financial planner in their right mind would be comfortable with these numbers as they stand. Employees still have a long way to go in order to be able to retire comfortably, and this cannot be overstated.”

Dperry@financialfinesse.com
(424) 218-7954

Financial Finesse is an unbiased financial education company providing personalized and
innovative financial education and counseling programs to over 500,000 employees at over 400
organizations. Financial Finesse partners with organizations to reach goals such as reducing
fiduciary liability, increasing plan participation, decreasing stress, and increasing productivity
through its unique approach to financial education. Financial Finesse does not sell products nor
manage assets. For more information, visit www.financialfinesse.com.

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