The Business of Financial Wellness 2.0

Written by: Steve Gresham and Suzanne Schmitt

Supreme Court Justice Potter Stewart famously remarked about pornography, “I know it when I see it.” The point was that it’s hard to otherwise put something that seems obvious into words.

We have a similar problem with the phrase “financial wellness.” Conventionally framed as managing daily finances, protecting against risks to your money and achieving goals, it’s best thought of as a journey where the destination is a state of financial well-being. Yet even the idea of being “well” can be highly subjective.

You can assess an individual’s financial health at a point in time, but their personal and familial circumstances are bound to change. Healthcare issues, for instance, can disrupt even the most thoughtful financial plans.

But if we are merely focused on investments and products we sell—as opposed to being well-being specialists—we haven’t gotten involved in those personal things. Viewed purely through a financial lens, many clients in their late fifties and sixties may be retirement ready. That instinctually leads us to jump to the conclusion they are financially healthy. We don’t lean into the messiness that is life and family financial planning.

And that could cost us.

It’s important that we prioritize well-being if we want to sustain the value of holistic, fee-for-service, fiduciary-level advice. If our clients don’t achieve peace of mind with their current advisor, they can be lured through workplace and retirement wellness offers to other firms where they think they will achieve it. Nothing motivates people more than fear—and many of our clients are genuinely afraid they will run out of money, need to sell their homes or move into assisted living.

In our personal experience (through our failures and successes), we’ve become convinced that centering our ideas on well-being can help advisors achieve their business goals (in the form of net new assets, growth in consolidated assets and increased share of clients’ wallets). Consider these five things:

Words matter. If you want the language you use to change the perception of your firm, remember that you should use words that offer peace of mind first, not technical concepts about asset allocation and investment policy.

You want better outcomes, not best efforts. Most retirement solutions in place today depend on market results and are subject to market risks. These risks are well known to the designers, who rely on their knowledge of capital markets research and dampen the risks by using long time horizons to smooth variations. While it’s a rational, objective approach that generally works for the population at large, individuals might have problems with the risks of the design and its terminal points: Today’s retiring clients and plan participants have seen down markets—big ones—in 1987, from 2000 to 2001 and from 2007 to 2009, as well as some sharp corrections in between.

The late father of Steve Gresham, one of the co-authors of this article, knew nothing about markets or investing, but he knew when the stakes were too high for his peace of mind. He worked for universities his entire career and earned the negotiated benefits of retirement annuities. He surprised Steve by sharing that he had converted his 50/50 stock-bond plans to 100% annuities with Steve’s mother as second life. He never looked again at the market. He cashed the checks, and now so does Steve’s mother at the age of 88. Their definition of “financial wellness” was not having to worry about the markets, their income level, their ability to finance healthcare or their ability to age in their home. Done.

The clients of financial advisors often are looking for a certainty of outcome. If the client is analytical and satisfied by data, they might enjoy a risk matrix offering a percentage likelihood of success. But it’s unlikely more than a fraction of our clients are like that—especially not retiring couples and their families. In most households, there’s someone who values protection and guarantees over potential returns or capital market theory.

The household is the client. Most advisors dealing with a household talk to the typically male and financially confident household head. Their firms may realize they should be dealing with multiple generations of a client’s family—including the spouses, the adult children and aging parents—but they haven’t given their advisors the direction to do it. This demographic sandwich, the generation above and below your clients, will drive more than 80% of advice industry profits through at least 2030. Our success depends on both keeping our existing clients and consolidating the assets we don’t currently oversee but our competitors do. Client relationship management software will have to accommodate entire families for this reason, and we’ll need to coach and train associates to talk about and to clients about these other family members.

Your service models will have to be for everyone. And remember, each of these different family members will have a different idea about what “peace of mind” means and whether you can offer it to them.

Frank McAleer, a senior vice president of wealth planning at Raymond James, asks clients, “What is the list of stuff you most worry about or that could go wrong as you live longer?” And “What about family members for whom you could become responsible?” The answers will be different for a 26-year-old 401(k) plan participant and for a 62-year-old pre-retiree. Different still for their families.

For this you might have to create separate service models for different family members—with different levels of communications, pricing and product and service options. One family member might want the reliability of a paper account statement; another might need the immediate transparency of a mobile app. When you have separate models, you can more easily and consistently focus on improvements for unique cohorts.

Wealthy families in particular expect their advisory firms, plan sponsors and plan administrators to offer a variety of models, including in-plan advice and fiduciary wealth management (with trust services). And if the past is any indication, those expectations will quickly spread to people in the mass affluent category and beyond.

Know how to implement. So how do you integrate “well-being” principles into your services? It’s a matter of both will and skill.

You may or may not possess the empathy you need when a client’s talk turns to the needs of an aging parent or the need to pay off a child’s college loan. If you don’t, that’s a management problem for your firm, which has to make sure empathetic advisors are in place. Your will to do this might suffer still, ironically because of your success at the markets—stock rallies likely make your work look easy and lessen your enthusiasm for harder tasks, such as mustering the energy to reach three generations of clients in a household. But if you fail at that, you risk less trust and less wallet share.

Technology’s Role

The bad news is that “wellness” is not a widget companies can attach to their existing offering. That approach has been attempted with the best of intentions by retirement income product providers. But the complexity of the products and their sometimes inconsistent availability (and pricing) are barriers to more consistent use in planning—and adoption by more advisors.

To achieve its true potential, “wellness” must be integral to the language and the systems and the solutions of a firm. I will never forget the call from a seasoned advisor who had completed his outreach to a wealthy family, with the help of the head of household. “I now have nine clients instead of one!” He was only partially kidding. It’s a lot of work to track the needs of families, and you don’t want to be the advisor who missed a Medicare election, a life event or the 21st birthday of a beneficiary.

The solution is a combination of systems for client data, simple technology tools for the clients that can be used along with the advisor’s old school training and coaching. The advisors and clients both will have to adopt the technologies to ensure the reach and consistency of engagement. And creating systems like this is the No. 1 job of today’s financial firm CEOs if they want to create peace of mind among both clients and advisory firm associates.

The Workplace

One way for a wellness specialist to connect with clients is by getting to know their workplace/benefits providers. Work is where your clients make much of their money and get basic insurance. As it happens, workers place profound trust in their employers and the service providers they offer. The public relations firm Edelman, in its 2023 “Trust Barometer,” said that workers trust their employers more than government, media, advertising or other corporate sources.

How much do you know about your clients’ benefits? Or their spouse’s or partner’s? Or the advisors who service their workplace plans?

It’s also a natural place to get more involved and introduce advice and guidance light. If we leaned in, we might find out about things like employer student loan repayments, which, as we noted earlier, could help a next-generation client who is looking at student debt as an obstacle to wealth creation early in their financial lives.

At best, you’ll find educational resources for your client. At worst, you’ll uncover risks to your relationship in the form of competing products, services and advice.

The next thing you’ll want to be on top of is your clients’ key life events—those inflection points when money is in motion. Studies suggest roughly two-thirds of consumers seek advice after a major life event (a marriage, a child going to college or a death or inheritance). These points present an opportunity for you to engage in advice and naturally place products, services and solutions. Workplace plans are getting smarter about using data to get in front of consumers in transition. How strong are your relationships and capabilities to help consumers to and through life changes? Is this a practice vulnerability for you?

Advisors focusing on wellness can also become more credible by choosing the right partners: trustworthy subject matter experts who offer you a deeper bench of knowledge. Different organizations can offer you support for issues concerning caregiving (something tackled by the National Alliance for Caregiving, for instance), general family financial health (a field covered by the Financial Health Network) and end-of-life planning (for example, the organization called Going with Grace).

How much do you know about your clients’ health, family health history and potential caregiving obligations? If the answer is “not much,” your clients may be at risk. The diagnosis of chronic health conditions is on the rise. Roughly 20% of people in the U.S. are currently acting as an unpaid caregiver—frequently to the detriment of their own health, financial security and professional growth.

Knowing more about these issues can help you retain clients. You’re also positioned for growth with the next generations.

What Advisors Get Wrong About Wellness

Remember the old saw: When you have a hammer, everything looks like a nail. The same is true with financial products. When you have one, you’re looking for a need and you do things backward.

Consumers aren’t looking for product. They’re looking for someone who deeply understands their needs; is empathetic; and offers objective, product-agnostic resources and advice.

Advisors also get things wrong if they’re not looking at the risks of a client’s entire family. After all, a client is only as financially healthy as the people who depend on them. Even if your clients seem to have their act together, how much do they know about their parents’ ability to navigate a major health setback? Or their parents’ ability to afford staying in their home as they age? How much do they know about their family’s financial plans and the impact events might have on their balance sheets?

And how well do you understand these risks your clients have taken on as you look across your book?

We also err if we forget that this is a journey. Let’s say that your clients have manageable debt, three to six months of emergency savings and are basically on track for retirement. Does that mean they are financially well? Life happens. Things change. Most advice givers think that the key is to get people to retirement, but it’s actually to get them through it. Given that most of us may live a third of our life in retirement, how exactly does that work? Our offering must also get into things like how retirees maintain independence, secure income and ensure long-term care, as well as their ability to share wealth with the next generations.

The biggest mistake is to play a short game.

Related: Seizing Opportunities: Don't Wait for the 'Great Wealth Transfer