Perspectives on Financial Wellbeing — Inspired by the 2018 Financial Experience Design Conference

The financial experience design conference attracts leaders from financial services organizations like TIAA, Vanguard, Fidelity, Prudential USAA, Sallie Mae, Bank of America and growing early stage companies like Ellevest, Ally Bank, and Lending Club, and NonProfits like FinHive, Commonwealth, and CFSI who have responsibility for the Experience, Design, Product, and Innovation groups at their organizations. The focus of the conference is designing to improve financial experiences and financial wellbeing.

Exploring Financial Wellbeing With Design and Innovation Leaders

The conference kicked off with forum where leaders could gather to discuss hot topics and at the top of the list was financial wellbeing. Amy Bucher, Ph.D. Organizational Psychology and Behavior Change Strategy Director for Mad*Pow presented how we might leverage Motivational Psychology to improve the financial literacy and health of the people we serve. She recommended starting with research, “People are complex, so we need to develop a deep understanding of what is important to them, their attitudes, and their behaviors.” She then advocated for leveraging known models for understanding constraints and designing interventions to overcome them, yielding engagement and outcomes. She introduced COM B model which contends that people will not exhibit the behaviors we are hoping for unless they have the Capability, Opportunity, and Motivation to do it. This model helps us to identify obstacles, opportunities, and ingredients that need to be considered when designing an effective intervention.

Following her presentation, the audience separated into small groups and dove into the first discussion prompt:

“Are financial services companies responsible for helping to improve the financial literacy and financial wellbeing of their customers?”

No. There are a whole lot of hurdles to overcome that make the whole thing too complicated.

There was initial general agreement amongst many in my group that it is not the responsibility of financial services companies to help people understand their financial standing or achieve financial wellbeing.

The biggest concerns that lead to the “No” answer were the level of literacy people have, their level of engagement, treading the line of not providing specific financial advice, and fighting the culture of instant gratification vs. long term planning. One leader pointed out that there is a spectrum of investment literacy from those who are just getting started to those who have become very savvy. There is a gap in engagement as well. “People set it and forget it. They tend to engage early when they enter the job market and are eligible for a 401k and then they disengage, only to reengage 40 years later as they prepare for retirement.” He also added, “It may be too late to introduce people to personal finance by the time they get to us. If they’ve had no exposure, it’s difficult to expect a financial services organization to help them to answer those questions.”

The group agreed that education focused on building literacy alone is probably not enough and even alone it is overwhelming. The group discussed who could be responsible for financial literacy if financial organizations are not? Maybe education in schools would help build a baseline understanding? But Champlain University did a study to understand how many high school students in the US were graduating with a baseline financial literacy and found that only 5 states are successful in doing that. Many schools handle it as an elective. One leader added “Kids can get used to using their parent’s money, haven’t built good money habits and be unprepared to join the grown-up society. A young person should probably start saving into an IRA but more than likely has no clue what an IRA is.”

FOMO or the “Fear of Missing Out” is often exacerbated by social media and was noted as a hurdle in getting people to think about long term financial considerations when they are designing their lives to “live large” in “right now” moments. How does this “small moment culture” affect our behavior? Are those moments in line with our values? “Loans happen because someone has accrued debt enjoying life or a big unexpected expense comes up that wasn’t saved for. Planning can feel so far away in the future and therefore not important. People wonder, ‘can I do the deep things required to change the future and be able to live the way I want to today?’ We need to transition from a moment economy to a responsible economy.”

The group agreed that probably 5% of people know what they are doing and the other 95% have no clue. So do we just design for the 5% who have a clue? In other groups it was identified that it is a flawed business objective to focus exclusively on high net worth individuals as it leaves a large segment of the market underserved and forfeits opportunity with such a large segment of the population.

Actually, yes. We should be doing this. It can be a win/win.

Then someone else spoke up, “Maybe we do have a responsibility, but do they think to come to us? Do we help them once they do? People want to know — Am I tracking? What should I do? Will I be alone here? Will I get advice? We need to educate customers, yet we expect them to understand our language, and we don’t do a good job of helping customers create and work toward their goals.” Some organizations talk about their responsibility in terms of helping consumers choose the “next right thing” to do on their journey, a concept actually leveraged in substance use disorder recovery to simplify the path.

The group agreed that there is oftentimes a “felt” responsibility at their organization to help people achieve wellbeing and that they employ behavioral economists who create strategies to try to “nudge” people along, trying to understand where are they in their journey and what are their motivations.

People need custom solutions based on their unique needs, yet another leader pointed out that, “We can’t tell people to buy this stock or sell this stock, so we create calculators and guided experiences, but ultimately people don’t seem to really engage with these things or understand the information presented and its relevancy to them, and ultimately they don’t take action as often as we would like. People don’t know what they need to do next.

We need to help customers pick the right solutions without making them feel like we are selling them all of the time. Perhaps there is an opportunity to provide a framework for decision making?”

And many questions remain, one leader asked “If our customers are happy will we make more money as a business? What are their needs and what are their wants? How do we help them with both? How do we co-create value? What is the short-term relationship and what is the long-term relationship? How do we keep clients who don’t need us right now anymore? We may have to invest in them for the short term to build trust and build toward a long-term relationship.”

Some said there was basic alignment between customer outcomes and company objectives, yet more alignment is needed. “Senior Management can fall into just using buzzwords, without being really connected with customer needs and wants. The phrase ‘customer obsessed’ gets thrown around, but the meaning may not be totally understood. We need to be more customer centric vs. function centric and focus on results as opposed to tasks and solutions.

There seemed to be consensus across groups that financial wellbeing for customers is in the best interest of financial services companies who make money off of their customers money. Ultimately, we are responsible for putting the customer’s best interest in balance with regulations and fiduciary responsibilities. But I think financial services companies can help define good behavior and outcomes for customers to consider and checkpoint their progress with them.

Financial wellbeing might not mean the same thing for everyone but there are objective measures like living above or below poverty level, ability to afford emergencies, and ability to retire, for example. But there are also need vs. want evaluations and both require understanding customer needs and wants. We need to help people to anticipate future financial needs based on knowing and understanding their aspirations. The concept emerged, of designing for people that are most at risk, with the thinking that if we can help them, then we can help everyone else as well.

Building Trust, Designing for Women, and the Overlap of Health and Finance

The leadership forum was the kick off to the conference and day two included presentations from inspirational speakers across the ecosystem. We heard from Jess Brown from Aspiration, a new bank that makes paying fees optional, and yet customers still pay them. They trust customers with the belief that trusting their customers will result in their customers trusting them. They integrate a thread of corporate social responsibility into their product by exposing how a company you just purchased from scores in terms of how they treat their people, and how they treat the planet.

Melissa Cullens, Chief Design Officer from Ellevest explained that many products are not actually gender neutral, they are designed for men. And women have unique and practical investment needs. They want to know, will I be able to buy a house, send my child to college, retire? They earn $.85 on the dollar compared to men and they live longer so it is important that she saves AND invests that savings. Yet studies say that women invest less than men and yet women will be in control of the majority of the assets moving forward. At Ellevest they are looking to understand what is important to women in terms of how they approach investing so that they can reduce barriers to entry and create experiences that satisfy the women they were custom designed for.

Tweets were flying as panels dove deep into designing for financial wellbeing, the ethics of behavior change, and what drives human behavior; all thrilling! The winners of the “Benefit Selection for Financial Security” design and innovation challenge run by Mad*Pow’s Center for Health Experience Design and Commonwealth were announced. The challenge explored how health benefit selection can select financial wellbeing and how we might support consumer literacy and decision making during open enrollment and throughout their journey. On our seats we found a Social Determinants for Financial Wellbeing poster, which illustrates the factors like employment, zip code, relationships, and other social factors that can influence your financial literacy, trajectory, and status. These key considerations can help us to overcome boundaries and can be transformed into design considerations as we design for inclusivity in financial wellbeing.

Then in the Hallway…

I bumped into a bright ray of hope, a financial wellbeing blogger Felicity from Fetching Financial Freedom. She introduced me to the concept of FIRE (Financial Independence Retire Early) and explained that she was tracking to retire next year at age 30. After picking my jaw up off of the floor, I did more research and found a wealth of information available on the topic. Those that have adopted a FIRE mentality are engaging in extreme frugality, saving 80% of their salary and living on the 20% left over, forfeiting the material amenities that their counterparts enjoy, and becoming investing gurus as they watch their savings grow and help make their dreams of early retirement come true. Everyone comes to FIRE for different reasons, and not necessarily because they want to do nothing, but rather because they want to do something — they want to have more freedom and agency to choose what they do with their time and make it meaningful as opposed to being a slave to the rat race.

Hope Restored.

And with that my hope is restored. People can and will accomplish amazing things, whether it is FIRE rebels creating their own model for success, or growing new companies that research and design explicitly for women, make paying fees optional, and inherently trust their customers, or people changing the culture inside a financial services firm to catalyze the virtuous circle that focuses on customer need, delight and wellbeing and yields satisfaction, retention, evangelism, and financial return. There are good things in the works that if scaled have the power to benefit many.