Recently, I've seen a number of articles lamenting the perception among both plan sponsors and advisors that there is no widely accepted, agreed-upon definition of financial wellness. I myself have referenced this perception, in relation to determining an ROI for financial wellness.

While confusion about what financial wellness means may be the case in practice, I have to disagree regarding the existence of a definition. We actually do have one, and we've had it for 4 years—since 2015.

In January of 2015, the Consumer Financial Protection Bureau published the results of their efforts to develop a conceptual framework and definition of financial well-being. This definition was a necessary prerequisite to creating a reliable and valid measurement tool to measure and assess financial well-being—which is the goal that all of us ideally want plan participants to reach.

The research project was notable for its thorough methodology and the insight it provided into the specific factors that contributed to an operational definition of financial well-being.

The definition is grounded in the existing research literature, expert opinion, and the experiences and voices of consumers, which were gathered through 60 hours of in-depth, one-on-one interviews with both working-age and retired consumers.

That's important because the experiences and opinions of intended recipients are all too often neglected in designing programs to benefit them.

According to the results of the study, there are four key elements that define the state of financial well-being. It's a state where you

Have control over day-to-day, month-to-month finances;
Have the capacity to absorb a financial shock;
Are on track to meet your financial goals; and
Have the financial freedom to make the choices that allow you to enjoy life.

Why isn't this definition more widely known and referenced? Maybe they need a better PR department.

But while the definition is important for many reasons, what stands out to me are two things.

First, it takes into account the fact that financial well-being has both objective components and at the same time is a subjective experience, one that isn't dependent on a certain income or asset level.

It acknowledges that people often have different goals that are equally important and meaningful.

Second, it's comprehensive. To reach financial well-being, people need the financial stability to withstand a financial shock and have control over their day-to-day finances—they're not living paycheck to paycheck, or using a credit card to cover an unexpected bill.

They also need a way to know whether they're on track to meet their financial goals.

Finally, they need financial freedom—enough money—to be able to have and make choices that allow them to enjoy their lives.

So what it all boils down to is this: if the definition of financial well-being is a comprehensive one, including both subjective and objective aspects, that means any authentic technology solution claiming to promote financial wellness needs to be comprehensive too.

Tools that address a single issue such as student loan debt or emergency savings are important and useful, but let's not call them financial wellness. That's like saying a steering wheel or set of tires is the same thing as a car. Each are important pieces, but not the equivalent of the total package.

All of us in the industry want to help plan participants reach their financial goals, and retirement is certainly one of them—a critical one that currently is out of reach for many Americans. To help them reach a state of financial well-being, let's start by using a consistent definition of financial wellness. One that is based on research that includes the voices of those being served by the benefit programs we provide.

Let's address both the subjective and objective components by offering comprehensive, authentic solutions that can meet people where they are, and effectively help them see the big picture of what they need to do to get where they want to go financially.

With only 14% of employees having access to any kind of resources to improve their financial well-being, a comprehensive approach to financial wellness is long overdue.

Martha Brown Menard, PhD is the Senior Researcher and data diva for Questis. She is a research scientist, financial wellness coach, and member of the Association for Financial Counseling and Planning Education. She is passionate about democratizing personalized financial guidance through scalable and configurable technology. Contact Questis to learn more about EARN.

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