The Financial Wellbeing Index (FWI) was -2.3 in fall 2021. This is a decline from the score recorded in the summer, LifeWorks confirms.
In fact, the year started well. Starting from a score of -2.8 in winter 2021, the FWI rose twice in a row: in the spring (-2.2) and summer (-1.6). The latest FWI is based on a survey of 3,000 Canadians conducted from December 3 to 14, 2021. It has been published every three months since January 2021. The index compares scores with baseline data collected in 2019.
According to the LifeWorks report, the decline in the index in fall 2021 demonstrates that Canadians’ financial health continues to be greatly affected by the pandemic. Overall, scores fell in all areas of financial wellbeing except for the impact of employees’ financial state on productivity, which improved slightly.
Participants with at least one child had lower financial wellbeing scores than those without children, the FWI report notes. Since the launch of the index, women have had significantly lower financial wellbeing scores than men. In fall 2021, women's financial wellbeing score was -4.1 compared with -0.6 for men.
Households reporting an annual income of up to $30,000 have the lowest financial wellbeing score (-13.4), more than 10 points below the national score. Individuals who reported a decrease in salary from the prior month have the lowest financial wellbeing score (-16.1). They are followed by those working fewer hours (-14.0). Managers have a slightly lower financial wellbeing score (-2.5) than non-managers (-2.1).
Inflation weighs on results
Yann Lussier Partner, Retirement Solutions and Financial Solutions at LifeWorks, interprets the decline in the Financial Wellbeing Index as a reflection of the environment at the time of the survey. “We were at the beginning of the fifth wave. Plus, since late 2021, the economic environment and the media were murmuring about inflation,” he told Insurance Portal.
Lussier adds that participants' responses signal a good understanding of inflation, which suggests that their level of concern about their finances has increased. Inflation has a significant impact on transportation, grocery and other expenses. “People are realizing that the level of spending is increasing significantly, while the growth in income is quite limited or lagging,” he points out. “There is a loss of purchasing power and a reduction in financial capability. I think those points have had a direct impact on the decline in our indicators.”
Stigma
Of the Canadians surveyed, 69 per cent think their colleagues would have a negative perception of them if they knew about their financial problems, or are unsure of how they would react. These respondents’ financial wellbeing scores are significantly lower than the pre-2020 baseline.
Financial status can have a negative impact on self-esteem and professional reputation, the report adds. Sixty-three percent of participants say they would feel negatively about themselves if they were in a poor financial situation. In addition, 39 per cent of Canadians believe that their peers at work would judge them negatively if they were aware of their financial issues. The survey also found that 35 per cent of Canadians are concerned about the impact on their career of their workplace being aware that they were in a poor financial situation.
Yann Lussier mentions that the stigma associated with mental health problems was much stronger 10 years ago. Today, people are less reluctant to seek health care even though the stigma persists.
Stigma affects more than two out of three Canadians with financial problems. “The index shows that financial stigma is double what we see in our Mental Health Index. Between 30 and 35 per cent of people believe that talking about a mental health issue would affect their peers’ perception of them or their career development” he says.
Embarrassed to contact an advisor
According to the FWI report, 70 per cent of Canadians have not seen a financial advisor in the past 12 months. This group has a lower financial wellbeing score (-5.3) than the 30 per cent who have seen advisors (4.7). Lussier believes that society has put a lot of energy into mental health issues. Even so, the stigma of financial problems is still the elephant in the room. “We've seen it in the past, and it's the same thing again this time! What will it take to get people to start taking control of their financial situation and tackling their problems?”
The Fall 2021 Financial Wellbeing Index also finds that 23 percent of survey participants said that embarrassment prevents them from seeking financial advice.
These respondents have a significantly lower financial wellbeing score (-15.6) than the overall average (-2.3). Managers are 70 per cent more likely than non-managers to claim that they would be embarrassed to seek advice from a financial advisor. Participants with children are 60 per cent more likely than those without children to say they would be embarrassed to consult a financial advisor.
Poor financial health is not just an individual matter, Yann Lussier points out. It leads to stress and absenteeism, and has a major impact on work. “Companies will have to take more responsibility for financial health,” he says.
Systemic problem
Yann Lussier underlined companies’ key role when he gave a talk about retirement and financial wellbeing issues at the Life and Health Insurance Convention in November 2021. His view has not wavered since: To support their employees, employers should focus on digital platforms that act as financial coaches for them (employees), he told Insurance Journal.
Lussier noted this need while networking with advisors at the convention, Lussier explains. He thinks advisors and financial planners must build a client base that will ensure they are compensated fairly for their work. “They are more attracted to wealthier clients who have money to manage. But those aren't necessarily the ones with the biggest financial issues. There's kind of a systemic problem. Financial planners won't work for free.”
That is where organizations come in, Lussier continues. “I urge employers to find ways to support their employees by promoting digital advisors or platforms that they can offer employees. These AI tools can help improve the bottom line for employees who need it because they are facing issues, but don't have access to support from an advisor,” he says.
Dedicated advisors and AI
Lussier gives the example of financial concierge services, where the employer makes a team of financial planners available to employees. A large enough company could put in place its own team of financial planners. Alternatively, a business could consider partnering with a financial institution to offer its employees concierge services.
Some issues can be addressed digitally, Lussier adds. These platforms are still in their infancy and artificial intelligence will be part of it, he says. He adds that LifeWorks launched a tool in April 2021 that helps employees assess their financial wellbeing. The tool is available to its employees and client organizations.
