Employee benefits are changing. Here's what financial advisors should know

Employee benefits are changing. Here's what advisors should know

August 21, 2023 3:47 PM

Arizent research shows workers are demanding new benefits to cope with today's challenging economy.

In today's challenging economy, the same old employee benefits just don't cut it anymore. Faced with high inflation and an uneven stock market, workers are demanding a variety of new financial wellness perks that go beyond the 401(k). But in many cases, they may need financial advisors' help to make use of them.

That's the upshot of a new study by Arizent, Financial Planning's parent company, which surveyed 200 executives and H.R. professionals at corporations across the country. The study is titled "Finding the Right Tools to Support Financial Wellness," and it can be viewed here.

From those employers' answers, it's clear that workers want more help with their finances. Two-thirds (66%) said their employees were financially stressed. Seventy-six percent said they were facing demands for higher salaries, and 50% said workers were asking for better benefits to cover rising out-of-pocket costs.

In response, many employers have begun offering additional benefits, including financial literacy training, supplemental health insurance and access to financial advisors. The problem is employees don't always take advantage of them, in many cases because they don't know how.

"It's difficult to ask for a specific benefit if employees aren't aware it exists — or if they don't understand how the benefit works," the study said. "Until these benefits become more widely available, this chicken-and-egg conundrum … may be likely to continue."

That's where financial advisors can come in. Wealth managers can help educate clients about what their benefits are, how to use them and what financial problems they can help solve.

Here's a look at some of the new benefits that employers are increasingly offering, and that clients may increasingly ask about:

Retirement

Among employers, there is little debate about the importance of retirement benefits. Of Arizent's respondents, 84% said they offer their employees 401(k)s. Almost as many — 78% — described retirement plans as "very important" or "absolutely essential" to their companies' recruitment and retention of employees. And the plans are popular with employees; 91% of employers said their 401(k)s are "well utilized" by their workers.

However, there is still room for progress. In addition to 401(k)s, companies could match employees' contributions to lifestyle savings accounts — a relatively new benefit that allows workers to build up savings for financial purposes other than retirement. So far, only 6% of companies offer this.

Financial literacy

Financial literacy benefits are less universally valued, but both employers and employees are showing increasing interest in them. These trainings and educational materials are designed to teach employees how to cope with common financial issues, such as debt reduction and budgeting.

Seventy-two percent of the companies Arizent surveyed said they pay for these benefits, and 51% let workers attend financial literacy seminars during the day. And though employees' demand for financial literacy was low — only 11% requested it — their use of the benefits was high. Sixty-three percent of companies said their financial literacy tools were well utilized.

Supplemental health benefits

All the employers in the study provided health insurance. More notable was that almost as many — 91% — provided additional or "supplemental" health benefits. These included prescription drug insurance (79%), mental health coverage (68%), fitness programs (52%), and fertility and family planning (23%).

And companies saw great value in these programs. About a third — 34% — said they were "ramping up" these benefits, and 62% viewed them as "very important" or "absolutely essential" to hiring and keeping employees.

"Supplemental health benefits such as behavioral or mental health care support might help improve productivity or reduce health care program costs, while also indirectly improving recruitment and retention rates," the study noted.

Financial advisors

Finally, there's the benefit that helps with all other benefits: access to a financial advisor. Only 31% of employers provided referrals to wealth managers, and even fewer — 17% — offered discounts or credits for working with one.

But when employees were offered these benefits, they made comparatively good use of them: 62% of companies said their discounts for advisors were well utilized, and 47% said the same of their advisor referrals. In a difficult economic environment, advice is a popular benefit.