In the wake of monumental economic disruption brought on by the COVID-19 pandemic – along with widespread financial fragmentation caused by consumers dividing their financial resources between multiple providers – a bright spot has emerged. Consumers are making their financial health a priority, and they’re looking to their primary financial institutions for help and support. With the latest studies indicating that nearly 166 million Americans are financially unhealthy, that’s a huge opportunity for banks and credit unions.
Community and regional financial institutions are rooted in relationship banking. Skilled at forming deep, personal connections with accountholders to assess their individual circumstances, anticipate their needs, and provide services to help improve their financial well-being, these institutions are well-equipped to tackle the financial health crisis in their communities head-on.
Assessing Financial Health
Improving financial health starts with measurement. Financial institutions often use the Net Promoter Score (NPS) to gauge the level of satisfaction of their accountholders. But an NPS score isn’t necessarily a good indicator of financial health. In an NPS survey, for example, participants rate their level of satisfaction with an institution, its products, or its service. But assessing financial health requires more than that.
Financial health considers the totality of an individual’s financial life: it looks at whether they are spending, saving, borrowing, and investing in ways that will enable them to be resilient and pursue opportunities. That’s why the FinHealth Score – a metric developed by Financial Health Network to assess financial health using eight survey questions – provides a more accurate measurement.
An aggregate FinHealth Score and four subscores are calculated for people who answer all eight survey questions. Answers to the questions result in a score between zero and 100, and results are broken down into three categories: vulnerable (having significant challenges in nearly all of the financial health indicators); coping (doing well in some, but not all, of the financial health indicators); and healthy (doing well across all eight financial health indicators).
Utilizing FinHealth Scores – along with other personal financial management (PFM) tools – to develop and implement a financial health strategy is a great way for community and regional financial institutions to guide the financial well-being efforts of their accountholders. Although there is no one-size-fits-all approach to building an effective financial health strategy, there are certainly lessons to be learned from studying financial institutions that have implemented successful strategies and programs.
So, what does a successful strategy look like?
Wright-Patt Credit Union’s Financial Health Program Hits the Mark
Ohio-based Wright-Patt Credit Union is a strong example of a financial health strategy done right. With nearly 470,000 members and $7.5 billion in assets, Wright-Patt uses the FinHealth Score as a key element in its five-week Finances in Focus (formerly called Money Magnifier) program.
The program provides both group and personal financial learning and coaching, as well as an action plan for members to help them assess and improve their financial health. Participants can view their financial health score, and the score helps coaches provide targeted guidance, while also allowing the organization to identify opportunities for improving financial health that are relevant to their members, depending on where they are in their journey.
After the initial engagement, Wright-Patt Credit Union conducted a six-month follow-up to study the results:
- Almost everyone who participated in the program had financial health scores that put them in the coping and vulnerable financial health categories. At the six-month check-in, slightly more than 80% of the participants had completed the financial health score survey, and half of those participants had set up and completed an appointment with a financial coach. That’s an incredible follow-through rate!
- Overall, program participants took real, quantifiable actions – they increased savings, used new products and services, and opened new credit union accounts.
- Based on the success of the program, Wright-Patt Credit Union is working on building organizational KPIs around financial health. They’re starting in marketing and ultimately plan to make it organization-wide.
Wright-Patt Credit Union’s success is a testament to how a comprehensive, accountholder-centric financial health strategy can bring huge benefits to accountholders – and to financial institutions.
Taking the First Steps Toward Building Your Strategy
Remember: financial health isn’t a destination … it’s a journey.
To best serve your accountholders in their moments of need, your institution should have a solid financial health program in place. Creating and executing an effective financial health strategy will take time, effort, and resources, but you don’t have to undergo the process alone. Jack Henry™ has the technology, tools, and solutions to help you implement a financial health strategy that will empower your accountholders to get a complete and accurate picture of their financial health, improve their relationship with money, and build the economic resilience necessary to ensure they are financially healthy and secure well into the future.
.svg)
