The Elusive ROI of Financial Wellness
Measuring the success of a financial wellness program from merely the employer standpoint is just doing lip service to their employees. To truly set up a financial wellness program that benefits users, companies must start to measure that success, writes
Blake Allison, CEO, and Founder, LifeCents.
When contemplating a financial wellness program one of the first questions people ask is “What will the ROI be?” It’s an important question, but it’s not the first question that should be asked.
Instead, it should be “What outcomes are we trying to achieve?” It’s impossible to establish a meaningful ROI without a clear understanding of the outcomes. When those are clearly defined, accurate ROI becomes easier to formulate.
The terms ROI and outcomes are sometimes used interchangeably, which can be misleading when trying to measure the value of a program. Individuals interested in offering a financial wellness program to their employees, customers, or other stakeholders are often required to justify the investment with a return measured in dollars. And why not? ROI is a critical metric that any financial wellness program sponsor must consider prior to an investment decision, since the bottom line is, after all, the bottom line.
Consider a participant in a financial wellness program who substantially increases their savings and pays down considerable debt. There is no tangible dollar-for-dollar ROI to the wellness provider or employer. This example suggests that the impact on individual participants must be considered in the calculus of ROI–even if there is no direct monetary benefit to the sponsor organization.
The Miscalculation of ROI
Measuring ROI dollar-for-dollar measure might fail to include other relevant outcomes that are possible with these programs. Long-term behavior change, for example, doesn’t immediately appear on a balance sheet, despite its tangible and enduring benefits.
Many financial wellness companies cite studies that assert financial wellness programs achieve a 3:1 ROI. For every dollar spent implementing a financial wellness program, the return will be three dollars, which would make any organization take notice. This impressive return is not wholly misguided, as it addresses vital factors that can affect any organization:
- Increased productivity
- Reduced absenteeism
- Lowered garnishment costs
It’s not surprising that the wellness industry actively promotes financial wellness programs as silver bullets for eliminating employee-generated costs. But a quick examination of ROI findings reveals the fallible nature of this claim.
Productive employees are valuable assets but might not be the best metric for gauging the effectiveness of financial wellness programs. A myriad of variables influence employee productivity levels:
- Sleep deprivation
- Managerial policies
- Or even, according to Forbes, office temperature
As a result, isolating lost productivity as solely indicative of financial stressors is statistically challenging. Additionally, reduced absenteeism, much like increased productivity, is not determined by any one factor, calling into question the accuracy of the 3:1 ROI calculation.
Reevaluating Wellness ROI
Not all financial wellness programs are alike. The tremendous diversity among providers of financial wellness, the range of wellness solutions available, and the varied expertise and experience among providers to deliver results, challenge the notion that a universal 3:1 ROI can be achieved by all programs and providers.
The current system of evaluating the “worth” of financial wellness programs should be re-examined. Having happier, more productive employees is essential, yet there are other relevant and insightful metrics that should be considered when evaluating the impact and value of financial wellness initiatives, including the increase in signups for employee benefits offerings and improved awareness around financial health.
Participants usually benefit from the program before any dollar value to the organization is derived, particularly when they engage with the financial wellness program over time. They gain value from participating in the program whether or not it is generating an immediate “return” to their employer.
Too often this disconnect between ROI and outcomes creates tension between stakeholders who champion financial wellness programs and those who make licensing decisions. It’s important that these groups understand that short- and medium-term successes must be attained before any meaningful monetary ROI can be achieved.
Learn More: How To Build Corporate Wellness Programs That Actually Work
A Better ROI Model
The 3:1 ROI model – although a useful standard for traditional business metrics – is not suitable to measure the impact of a financial wellness program. This model implies that all financial wellness programs function similarly, utilize the same features, measure the same outcomes, are implemented uniformly, and so on.
It takes time to obtain direct monetary returns resulting from long-term behavior change. Even proponents of dollar-based measures of ROI should expect that the time horizon will be years before they see a return on their investment.
ROI needs to be redefined, both in the context of financial wellness programs as well as in alignment with programmatic goals and user priorities. Outcomes such as user engagement, user progress, improvements in participants’ financial health and other achievements are the better measures of the real value of financial wellness programs—not traditional interpretations, or dollar-for-dollar ROI.
Learn More: Making Financial Wellness Smarter With AI & Cognitive Computing