Money, lending money and borrowing money have historically been taboo discussion topics, but that should not be the case when it comes to a consumer’s financial institution. 

Consumer financial wellness should be a top priority for financial institutions, but a lot of institutions merely pay lip service to the concept. What exactly does financial wellness mean anyway? Is that short-term financial wellness, long-term or somewhere in between? 

Of the 44,674 accountholders surveyed in our 2021 Relationship Survey, only 43 percent of respondents said they felt either extremely or very financially healthy: fewer than half!

Self-Reported Financial Health

Source: Raddon Relationship Survey (Question: In your opinion, how financially healthy do you think you are?)

It can be challenging to pin down a definition of financial wellness. For consumers, it can mean a variety of things, from their current financial state, to planning for their first home, to planning for retirement. No matter what life stage consumers are in, financial institutions have a responsibility to guide them along the best path.

Where do you start? Ask yourself this question: As an institution, are you prepared to help customers in their financial journey? If your answer is “Yes, we have documents on our website that our customers can access for information,” then you are NOT prepared to help your customers. Having documents on your website as a reference tool is only one piece of the puzzle and often just “checks the box” that allows financial institutions to say, “Yes, we offer financial wellness.”

The path to financial wellness starts with asking customers how they feel about it. Generally, consumers want their primary financial institution (PFI) to help them achieve financial wellness, but you need to have that relationship and trust with your accountholders. Accountholders must see you as their advocate, and most do not. In our 2021 Relationship Survey, only 25 percent of respondents strongly agreed that they saw the employees of their financial institution as their advocates. 

Agreement That Employees of Their Financial Institution Are Advocates of Their Financial Welfare

Source: Raddon Relationship Survey (Question: Please indicate your level of agreement to this statement: The employees of {institution} are advocates of my financial welfare.)

What do you really know about your accountholders, and is your team ready with the right accountholder experience, products and services to meet their needs? For instance, when asked about the availability of emergency funds, our survey information showed that 5 percent of consumers said that they could not cover ANY emergency expense, and 22 percent said that they could not cover an emergency expense of $400 of more with liquid funds (cash). That number more than doubles when the amount of that emergency dollar amount goes from $400 to $1,000. In that case, 37 percent said they could not cover that expense with liquid funds. As you might expect, the percentage only continues to grow as the emergency expense increases.

Could Not Cover an Expense of a Certain Amount with Cash or Money from Liquid Deposit Account

Source: Raddon Relationship Survey (Question: Suppose you have an emergency expense. Based on your current financial situation, how large of an expense could you pay, using ONLY cash or money from your checking or savings account?)

When asked how else they would pay for that emergency, consumers overwhelmingly said with a credit card. Specifically, 34 percent said with a credit card and would pay it over time, 33 percent said with a credit card that they would pay off all at one time, and 22 percent said with a loan or line of credit from a bank.

Do financial institutions know any of this information about their customers? What percent of customers have less than $400 in their liquid accounts? Is this the only account they have with the institution? Are they a good candidate to begin a conversation about an emergency fund? If they are going to use a credit card, what credit card do they have and what current interest rate do they pay? Is there a way to get customers to use your card with a lower interest rate? The list of questions can go on and on.

This is where having the right products, services and overall experience for customers becomes critical. What is available for customers in the event of an emergency? At the beginning of the pandemic, financial institutions whipped up products at a moment’s notice, such as 0 percent or low-rate emergency loans or lines of credit to help customers. Are products like these still available to customers who are facing an emergency, or are we forcing them to use a high-rate credit card that could potentially take years to pay off? Or worse, seek out a payday lender?

Conclusion 

Financial wellness is more than words on a page and links on a website. Financial wellness is a commitment to your customers that you will provide sound advice, useful and competitive products, services and meaningful direction. This doesn’t come without work or investment across all parts of the institution. It requires investment in your products, services, technology, infrastructure and people.