EL SEGUNDO, Calif.-Employee financial wellness improved in the first quarter of 2013, extending a long-term trend that began in the first quarter of 2010, according to financial wellness program provider Financial Finesse.
The firm's latest quarterly study for Q1 2013 found employees' overall financial wellness score reached 5.2 out of 10, up from 4.9 out of 10 one year ago, as measured by its proprietary financial wellness scale.
Proactive Behavior Makes Difference
This general improvement may be related to an increase in proactive behavior, the firm noted, as 75% of questions received by its team of certified financial planners dealt with making financial plans and improving financial behaviors rather than dealing with financial problems or emergencies. Employee utilization of financial education also is increasing, as employees seem to be actively taking control of their finances rather than waiting for a financial problem to occur.
In addition to asking more proactive questions, employees took more proactive steps toward retirement planning and investing. Among the findings:
* 40% of employees reported having used a retirement calculator to see if they are on track for retirement. This is up from 37% in Q1 2012.
* 49% of employees reported having taken a risk tolerance assessment, up from 43% in Q1 2012.
* 39% of employees reported feeling confident in the way their investments are allocated, up from 33% in Q1 2012.
Employees also appear to be doing a better job diversifying their portfolios. A smaller percentage reported having 15% or more invested in a single position, while a greater percentage reported rebalancing their portfolios and reviewing combined assets to develop a master asset allocation strategy.
According to Financial Finesse, improvements in retirement and investment behavior may be in part due to plan design innovations, including better communication of target-date funds and/or investment advisory tools. Strong recent investment performance may have an impact on the recent uptick in confidence, the firm said.
Improvements in financial wellness were most pronounced in lower income households, Financial Finesse reported.
Where 'Marked Improvement' Has Been
Those making less than $60,000 per year saw "marked improvements" in the last 12 months. The firm said this may be further evidence that the economy is strengthening. "This is an encouraging sign as this demographic is traditionally most vulnerable to economic changes," the company said.
Not saving enough for retirement continues to be the top vulnerability for employees, although Financial Finesse noted the percentage of employees that have this vulnerability has steadily declined. "The good news is that most employees recognize this vulnerability, and are taking steps to address it."
