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Dimensions & Insights: How inclusive principles can transform financial wellness

As more savers are prioritizing financial independence over traditional retirement, the need for an inclusive-focused approach to financial planning has never been more critical, according to Franklin Templeton’s Regina Curry and Jacque Reardon. Read more about their conversation in this article.

In a time where financial independence is increasingly prioritized over traditional retirement, the need for an inclusive-focused approach to financial planning has never been more critical. I recently spoke with Jacque Reardon, Head of US Marketing at Franklin Templeton, who offered insights into the evolving landscape of financial independence—drawing on data from the company’s annual Voice of the American Workplace (VOTAW) survey.1

In our conversation, Jacque highlights trends and underscores the necessity of integrating inclusive principles into financial strategies to address the unique needs of a diverse and multi-generational workforce. Learn more about our discussion in the following highlights.

Financial independence grows in significance

In recent years, the idea of being financially independent has become more important. This is shown by the VOTAW data, which rose more than 7% this year. I think it’s definitely been a cornerstone of our research over the last couple of years that folks are actually migrating more toward that idea versus perhaps traditional retirement or other financial wellness,” Jacque explained.

However, many individuals have noted that achieving financial independence is becoming more elusive. “Sadly, the likelihood that people feel like they’ll actually reach financial independence has gone down,” she noted.

The VOTAW study found fewer workers were confident about the likelihood of achieving financial independence, reflected in a 6% decline year-over-year.

This paradox highlights a critical issue—while more people aspire to financial independence, fewer believe they can achieve it.

Retirement savings gap

The retirement savings gap is a symptom of the obstacles faced by savers. Jacque recently participated in a symposium discussing “Retirement Savings Equity and the Pursuit of Financial Independence,” with panelists from Morgan Stanley and Deloitte. There is a collective retirement savings shortfall across all workers, and the gap is particularly notable among women and minorities, according to Deloitte. When people start saving, income levels and interrupted careers due to raising children and caregiving are some of the challenges.

Financial stress is an obstacle

A major factor contributing to this challenge is financial stress. Jacque noted, “Most of the concerns that people express are about finances. If you inquire about their worries, chances are they will mention a few financial matters,” Jacque observed.

The VOTAW survey found worries over earnings, maintaining a way of life and health care expenses are major stress factors.

By incorporating inclusive strategies to meet the needs of clients, advisors may help them feel more confident about their financial choices on the path to fiscal autonomy.

The imperative for a holistic financial approach

“Data from the VOTAW supports the need for a holistic approach to financial health,” Jacque said. The financial industry, she argues, has been overly focused on retirement savings at the expense of other financial needs. “We are, unfortunately, as an industry, super-obsessed and super-focused on retirement,” she said. “Instead of helping individuals really think across the spectrum of financial needs.”

Jacque’s point is supported by data from the Employee Benefit Research Institute (EBRI),2 which shows that while retirement savings are crucial, other aspects of financial health, such as managing debt are also important. In its 2023 survey, EBRI found many workers were concerned about saving enough for retirement and nearly two-thirds of workers noted their debt was a problem.

Addressing these areas can alleviate immediate financial stress and contribute to long-term financial stability.

More companies have reported offering financial wellness benefits, yet they have noted these are underutilized. The VOTAW survey found 49% of employers offer a financial wellness platform but only 28% of employees use it.

Employees may need assistance understanding their benefits, especially younger workers. According to the VOTAW survey, while 72% of workers reported facing challenges in understanding employee benefits, this issue is even more pronounced among Gen Z, with 86% struggling in this area. This highlights the need to tailor benefits communication and education to meet the unique expectations and preferences of this generation, ensuring they can fully utilize and appreciate the resources available to them.

An inclusive approach also ensures that financial planning, advice and resources cater to the diverse needs of all individuals, considering factors such as cultural differences, socioeconomic backgrounds and unique financial goals. This holistic perspective can help bridge gaps and create a more equitable financial landscape.

Financial inclusion benefits individuals and communities

Financial inclusion is not just a moral imperative but a fundamental component of economic recovery, Deloitte found in a recent report on financial inclusion.

The post-pandemic analysis found that addressing inequities is crucial in ensuring an equitable recovery that empowers and uplifts those who have historically faced barriers to financial wellbeing. In particular, financial inclusion has emerged as a viable solution that can enhance the availability of financial resources and tools to those who need them the most and foster economic growth and improve the quality of life. Integrating underserved communities into the financial system can lead to more robust economic health, the study found.

Balancing financial health with other health domains

The VOTAW survey also found a shifting balance between financial health and other health domains, such as physical and mental health. Historically, people viewed these areas as equally important, but recent data indicates a shift. “This past year, our research has shown that the stress related to financial health and the importance individuals put on it far outweighs other areas of health—upwards of 15% year-over-year,” Jacque revealed.

The imbalance suggests that financial stress is now a dominant factor in overall well-being. A survey by PwC found that 57% of employees cite financial matters as their most significant source of stress.3 This heightened focus on financial health underscores the urgent need for comprehensive financial wellness programs that address diverse financial challenges.

Personalized financial solutions—a path forward

To help people get out of debt, Jacque wants to find solutions that are right for them. Upwards of 84% of people are saying, ‘I want more personalized resources, I want more personalized benefits when I think about addressing and planning for the future,’” Jacque cited from the survey.

By offering customized guidance and support, financial institutions may help individuals achieve their goals. Again, an inclusive approach to personalization considers the unique circumstances and challenges faced by diverse groups. For instance, financial strategies that address the specific needs of women, people of color and low-income households can help close the financial equity gap and promote financial well-being.

Solving for the disconnect

To improve the engagement of participants with their retirement savings, industry leaders can consider several ways to support them:

  • Gain deeper understanding of the participant base through data collection
  • Offer customized workplace savings plans to meet individual needs and be more inclusive for all savers
  • Personalize overall benefits to support employees in managing their financial wellbeing, including debt and emergency saving
  • Improve communications to help more workers understand their benefits and actively take advantage of them

Conclusion

Jacque’s insights from the VOTAW survey illuminate the critical intersections between financial independence, financial stress and the need for a holistic approach to financial planning. As we strive toward a future where financial independence is accessible to all, we believe integrating inclusive principles into every facet of financial services will not only be beneficial—it will be essential. By using this approach that includes everyone, we can make sure that everyone can reach their financial goals.

For additional information, please contact the Franklin Templeton Retirement Sales Department at (800) 530-2432.

The Voice of the American Employer Survey was conducted by The Harris Poll on behalf of Franklin Templeton from November 6 to November 17, 2023. All 1,000 respondents, based in the United States, are classified as employers, defined as having at least some influence over company benefits and/or hiring at organizations with over 100 employees. Respondents represent a mix of industries, company size, role, age, and race.

This presentation also references a qualitative study conducted by The Harris Poll on behalf of Franklin Templeton from August 15 to August 25, 2023, among 15 American employers. All interviewees were full-time employees working in human resources, who have influence over employee benefits, and included those with titles such as HR Manager, HR Director or HR Vice President, among others.

This was a blind study, as Franklin Templeton was not mentioned in order to avoid bias.

The Voice of the American Worker Survey was conducted by The Harris Poll on behalf of Franklin Templeton from November 9 to November 21, 2023, among 2,001 employed US adults. All respondents had some form of retirement savings. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Findings from 2020 reference a study of a similar nature that was conducted by The Harris Poll on behalf of Franklin Templeton from October 16 to 28, 2020, among 1,007 employed US adults, study from 2021 also references a similar survey conducted among 1,005 employed adults from October 28 to November 15, and a study from 2022 also references a similar survey conducted among 1,000 employed adults from October 17 to October 27.

Franklin Templeton is not affiliated with The Harris Poll, Harris Insights & Analytics, a Stagwell LLC Company.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

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1. Source: The Voice of the American Employer Survey was conducted by The Harris Poll on behalf of Franklin Templeton from November 6 to November 17, 2023. All 1,000 respondents, based in the United States, are classified as employers, defined as having at least some influence over company benefits and/or hiring at organizations with over 100 employees. Respondents represent a mix of industries, company size, role, age, and race. The Voice of the American Worker Survey was conducted by The Harris Poll on behalf of Franklin Templeton from November 9th to November 21, 2023, among 2,001 employed US adults. All respondents had some form of retirement savings. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Findings from 2020 reference a study of a similar nature that was conducted by The Harris Poll on behalf of Franklin Templeton from October 16 to 28, 2020, among 1,007 employed US adults, study from 2021 also references a similar survey conducted among 1,005 employed adults from October 28 to November 15, and a study from 2022 also references a similar survey conducted among 1,000 employed adults from October 17 to October 27.

2. Source: “2023 Retirement Confidence Survey.” EBRI. April 27, 2023.

3. Source: “2023 Employee Financial Wellness Survey.” PwC.

 

 

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