While on vacation at Canyon Ranch in Tucson, I had an opportunity to take a workshop about joy. It’s a little word for such a big concept. Without that je ne sais quoi that puts a smile on one’s face and pep in each step, life can become a series of “must do” items instead of “let’s go” moments. That’s not an ideal outcome for individuals or their friends and families. Companies have a stake in the happiness game as well.

Motivated and satisfied employees can add to the bottom line through productivity gains. Employees on the other end of the spectrum can add to health care costs and reduced output due to excessive absences. According to the Global Wellness Institute website, “The world’s 3.2 billion workers are increasingly unwell.” This explains why companies around the globe spend upwards of $40 billion on wellness programs.

A few years ago, the Rand Institute carried out a large-scale survey of nearly 600,000 individuals who participated in wellness programs offered by seven companies. What they found may surprise some. While the lion’s share of wellness budgets was spent on improving lifestyle skills such as smoking cessation or losing weight, return on investment (“ROI”) was significantly higher for disease management efforts. The take away is that employers are not allocating monies wisely and need to modify accordingly.

If true that organizations should budget mostly on addressing existing illnesses or preventing new realizations, there could be a heightened demand for psychological or behavioral specialists. Those individuals who can afford to seek outside help will clamor to understand their malaise and emotional deficit, even when their bosses look askance.

In his Forbes opinion piece, Dan Pontefract discusses the importance of sharing a vision that excites and empowers. He cites surveys that demonstrate a C-suite awareness of the purpose-profit connection even when these same executives do little to activate their team around a shared vision. Instead of rewarding people for short-term bottom line advances, this author and researcher urges companies to ratchet up their efforts to do well by doing good. Whether the metric is excellent client service or operating with better ethics than a peer, his take is that managers should address more than the quarterly bottom line.

This first Monday in September finds millions of Americans and Canadians celebrating Labor Day 2016 with a day off from work or school. For some it marks the end of summer and a return to "no play" for awhile. Smart employers know otherwise and are implementing policies to encourage playtime at the office or plant as a way to boost productivity, encourage innovation and lower healthcare costs.

According to business executive Paul Harris, implementing play at work policies can be challenging, in part due to gender and age differences. Drawing from recent survey results, he explains that "While 51% of 16-24 year olds would like allocated ‘fun time’ at work, this drops to just 19% for 55-60 year olds." The good news is that certain activities such as shared birthday celebrations or board games appeal to broad groups and ought not to be overlooked by employers. Read "Why it pays to play: workplace fun breeds employee wellbeing and productivity" (HR Magazine, April 12, 2016).

Snack Nation, a commercial delivery service, has a snappy visual on its blog entitled "11 Shocking Employee Happiness Statistics That Will Blow Your Mind." Citing research from organizations such as Gallup, they reference greater sales, employee engagement and fewer sick days as some of the positives associated with workplace improvements. NPR extols the virtues of adult recess and Today Money highlights why big companies, "not just startups" are focused on fun at work. The National Institute for Play consults with business leaders who want "to more effectively access innovation in their operations," asserting that "science already provides data to show that playful ways of work lead to more creative, adaptable workers and teams."

Mark Schiff, a dentist friend of mine, credits his success as an award-winning painter in part to an ability and willingness to embrace his inner child and freely express himself. My husband, one of the hardest working people I know, regularly takes time to play. (He’s a keen competitor in Scrabble.) I’ve attended lots of business development workshops that include seemingly silly exercises designed to encourage adults to think outside the box as a way to advance goals.

I love these words from Thomas A. Edison, inventor extraordinaire. I hope you do too: "I never did a day’s work in my life. It was all fun."

In celebration of National Book Lovers Day, it’s worth noting that some scientists are extolling the virtues of words for good health. According to "Reading books could increase lifespan" by Honor Whiteman (Medical News Today, August 8, 2016), a new analysis suggests that regular readers have a greater chance of survival compared to those who use their time for other activities.

Utilizing Health and Retirement Study data for nearly 4,000 American adults, Yale professor Becca R. Levy, with Avni Bavishi and Martin David Slade found that "Books are protective regardless of gender, wealth, education or health" and "… are more advantageous for survival than newspapers and magazines in terms of cognitive benefits. (Click to purchase "A chapter a day: Association of book reading with longevity," Social Science & Medicine, Elsevier Ltd., September 2016.)

For bibliophiles everywhere, this discovery is good news indeed, assuming that their results apply to the population at large. 

No sooner had I written "Financial Technology and the Fiduciary Rule," an invitation to the Future of Finance 2016 appeared in my in-box with the call-out that "Technology is about to revolutionise financial services." (Note the British spelling for this Oxford conference.) Based on session titles, attendees will hear about topics such as how technology can:

  • Be "used to build trusting relationships with clients" and increase transparency;
  • Substitute for "expensive human intermediaries" to lower costs; and
  • Encourage the creation of "simpler and cheaper" insurance and savings products.

Increasingly, angels and venture capitalists are waking up to the fact that the global retirement marketplace is big and ripe for innovation. Earlier today, Goldman Sachs Investment Management Division announced its intent to acquire Honest Dollar. According to CrunchBase, this transaction follows a seed financing last fall to further build a web and mobile platform that allows small businesses to cost-effectively set up retirement plans. Expansive Ventures led that round that includes former Citigroup CEO Vikram Pandit and will.i.am, founder of The Black Eyed Peas musical group.

Yet another indication that investors see "gold in them thar health care and retirement plan hills" is a $30 million capital raise for a company called Namely. Its February 23, 2016 press release lists Sequoia Capital as the lead venture capital firm for this round, bringing its total funding so far to $107.8 million for this "SaaS HR platform for mid-market companies."

Interestingly, in articles about both Honest Dollar and Namely, the tsunami of complex regulations is cited as a reason why employers need help from financial technology organizations. With mandates growing and becoming more muscular, no one should be surprised if cash-rich backers write big checks to financial technology businesses. As Xconomy reporter Angela Shah points out, multiple start-ups are "trying to compete for the 80-plus percent who don’t offer benefits."

There is no doubt that the competitive landscape is changing and will prompt more strategic soul-searching for vendors and policy-makers alike. I’ve listed a few of the many questions in search of answers as things evolve.

  • Will other large financial service organizations like Goldman Sachs swallow up smaller start-ups? If so, does that change the role of angels and venture capitalists?
  • If enough of these companies pop up to serve small businesses and self-employed persons, is there still a need for the product offered by the U.S. government – myRA?
  • Will the U.S. Department of Labor fiduciary rule, if passed into law, accelerate the formation and growth of financial technology companies? If so, how?
  • Will there be a need for more or fewer financial advisors as the financial technology sector grows?
  • Will individuals buy more insurance and savings products? If not, why not?

Life in financial services land will never be dull.

In case you didn’t know, today is National Doughnut Day. According to ABC News, Cumberland Farms and Krispy Kreme are a few of the sellers that are giving out freebies in celebration of this longstanding holiday. In its May 28, 2015 press release, Dunkin’ Donuts (another participating retailer) informs that the holiday has been around since 1938, having been created "to honor women who served donuts to soldiers during World War I." The history of this sweet treat goes back even further. Smithsonian Magazine chronicles the popularity of the doughnut, citing its introduction to Americans by the Dutch when Manhattan was called New Amsterdam. Since then, sales have soared with 2012 doughnut store revenue reported at $11.6 billion.

Presumably free doughnuts generate sales of other products like coffee or tea and that is one motivation for holiday largesse. Another motivation for giving things away has to do with product branding. The Chief Marketing Officer Council website touts a 2015 global estimate of $540 billion as the amount that companies expect to spend on advertising. I experienced this firsthand when I recently spoke at the Government Finance Officers Association annual conference. Before my session, I perused some of the booths in the exhibition hall. I now have stress balls, pens and tote bags that sponsors gave away in droves to ensure continued name recognition. Two days ago, the subject of branding came up again when I met with the general counsel of a large financial institution. He specifically used the term "building the brand" when describing transparency and good governance as a way to differentiate his firm’s offerings to pension funds, endowments and family offices.

This got me thinking about benefits that employers offer to attract new employees and retain existing talent. Jen Schramm writes about a 2014 survey in "Which Benefits Attract Highly Skilled Workers?" (Society for Human Resource Management, April 1, 2015), stating that health care, retirement and leave arrangements "were the top benefits used to retain employees at all levels of an organization." This finding leads to logical questions about (a) how employers are branding the benefits offered in seeking to fill jobs and (b) whether only well-funded and viable plan benefits get promoted to newcomers and existing workers.

Understanding some basics about branding helps. Mark Di Somma recently addressed the seven R’s of a powerful branding strategy to include the following:

  • Resonance – Does a brand "talk to people’s needs in ways that feel personal, relevant and wonderful?"
  • Resilience – Does the brand create a competitive advantage?
  • Results – Will the brand add to the bottom line?
  • Resolution – Is the brand inspiring and "Does it align with the vision and the purpose?"
  • Radiation – Will the brand generate positive conversations?
  • Redefinition – Does the brand dazzle or simply move the deck chairs around?
  • Recognition – Does a brand build on what customers (in my example, employees and prospects) already know?

His points can be applied to the offering of various benefits and related communications with participants. Based on my experience as a forensic economist, numerous cases on which I have worked in the last few years allege poor communications and rescinded benefits (even when perception differs from reality). In brand parlance, this means there is low resonance, low resilience and low resolution. Participants do not feel that the benefits meet their needs. Increased costs relating to factors such as longevity are reducing the bottom line and forcing lots of companies to rethink whether certain benefit programs should be maintained. Underfunded and badly managed benefits can lead to negative "radiation" as reflected in the growth of putative ERISA class actions with multiple disgruntled employees willing to serve as plaintiffs.

The topic of benefits "branding" (i.e. using benefits to attract and retain talent as a way to create enterprise value) is far from trivial. Companies throughout the world are seeking to balance the costs of offering benefits against the hope that a generous HR mix helps shareholders too. It is certainly food for thought, in between bites, for those who plan to munch on a free doughnut today.

Anyone who has been on the receiving end of major surgery may tremble after reading "How to Make Surgery Safer" (Wall Street Journal, February 16, 2015). Journalist Laura Landro describes a panoply of horribles such as operating on the wrong body part or leaving a foreign object inside a patient’s body. Honing in on "never events" (i.e. those that are serious and should never occur), she describes attempts by hospitals to reduce human error in a quest to contain the rate of injury, minimize the number of deaths and avoid the billion dollar whack for serious faux pas. Besides the collection and analysis of big data to glean lessons learned and track performance, the writer describes how operating room teams are being prepped to emphasize safety in numerous ways. These include, but are not limited to, the following:

  • Adding radio frequency tags to instruments and sponges;
  • Empowering nurses to override a doctor’s orders to wrap up if questions exist about missing items;
  • Convening as a team to agree on strategy before any cuts occur;
  • Identifying ahead of time what procedure should take place and on what part of the body;
  • Training all staff about how to use electrical equipment;
  • Creating, and then following, an appropriate checklist; and
  • Asking patients to actively participate by getting into good shape ahead of time and scrubbing with anti-bacterial soap prior to surgery.

In the pension world, setting a risk management objective by proverbially marking the target spot with a big X merits consideration. After all, if the goal (or set of goals) is vague or flat out wrong, chances are that the "operation" will fail. Should that happen, the "patient" (i.e. participants) could suffer.

The concept of proper goal-setting is far from trivial. Fiduciary breach allegations are undeniably here to stay, courtesy of an increasingly active plaintiffs’ bar. Settlements can cost sponsors millions of dollars, even when a company feels strongly that it has done everything correctly. Changing regulations could up the ante. According to "President Obama to Address DOL Fiduciary Redraft at Monday AARP Meeting" (Think Advisor, February 22, 2015), proposed standards put forth by the U.S. Department of Labor appear to be moving closer towards some type of final conflict of interest rule. In a January 13, 2015 memo, the White House seems to be taking the view that retirement plan fees are often too high and have cost savers more than $6 billion. No doubt the financial industry will continue to rebut these estimates.

Based on my experience as a forensic economist and someone who has served as a testifying expert, goal-setting is hugely important when it comes to resolving disputes. An inevitable question is whether something went awry and, if so, what monetary damages should be paid (and to whom). Answering inquiries about whether wrongdoing occurred (and its magnitude) has to start with identifying the objective(s) and then examining the achievement of said goals (or lack thereof).

Similar to the health care profession, continuing to up its game in terms of process improvement, retirement plan sponsors (and their service providers) have a vested interest in creating goals that are (a) clear (b) measurable (c) realistic and (d) appropriate for the situation at hand.

The tug of war continues between pension plan participants and outside creditors. As a result, doing business with troubled municipalities may end up costing creditors time, money and headaches. Just a few days ago, Judge Christopher Klein with the United States Bankruptcy Court for the Eastern District of California ruled against Franklin Templeton Investments. By doing so, this asset manager will not be able to recoup the $32 million it sought from the City of Stockton as the municipality seeks to exit bankruptcy. Instead, as Reuters journalist Robin Respaut writes in "Holdout creditor in Stockton bankruptcy denied higher claim" (December 10, 2014) the city’s plan would give Franklin "just over $4 million of the $36 million it said it is owed." This follows an October thumbs-up from the Court to reduce the payout to bond investors in order to maintain retirement and health care benefits and thereby (hopefully) prevent an exodus of badly needed city workers. 

A topic not actively discussed but critically important to ignore is that once-burnt lenders are unlikely to come knocking again. If they do, they will charge a higher cost of capital and demand tighter collateral safeguards to reflect the bigger risk associated with exposure to struggling borrowers. After all, lenders are accountable to their customers. As Bond Buyer‘s Keeley Webster describes, investors in Franklin California High Yield Municipal Fund and Franklin High Yield Tax-Free Income Fund will suffer as the result of a low recovery rate in the neighborhood of twelve percent for loans made to Stockton. 

As Attorney B. Summer Chandler discusses in "Is It ‘Fair’ to Discriminate in Favor of Pensioners in a chapter 9 Plan?" (American Bankruptcy Institute Journal, December 2014) putting pensioners ahead of other unsecured creditors may not seem right to some but could be supported by "limited case law assessing chapter 9 plans…" taking into account "the unique nature of a municipality, its relationship to its citizens (including pensioners and current employees) and the purposes of chapter 9…"

To reiterate, customer risk is real for organizations such as Franklin Templeton. Unless its higher costs can be passed along to customers, expect some lenders and suppliers to say "never mind" and look elsewhere for business. This would logically reduce the supply of capital and services and could mean higher costs for all municipalities, not just those seeking bankruptcy protection. As my co-authors and I discuss in "Muni Bonds, Pension Liabilities and Investment Due Diligence" by Dr. Susan Mangiero, Dr. Israel Shaked and Mr. Brad Orelowitz (American Bankruptcy Institute Journal, July 2014), the evolution of decision-making can reduce uncertainty. We add that "…legal, economic and political skirmishes associated with municipal bond distress now being played out are helping to set the stage for future clarity." We assert that future bond buyers may still lend to a municipality if they "are comfortable in their belief that large unfunded post-employment obligations can be compromised as part of a distressed-debt workout…" and that "fresh capital can be a lifeline for a municipality that has fallen on hard times, even if it comes with a higher service cost.’

The best outcome is that pension-plagued municipalities seeking to exit from bankruptcy get their financial house in order as quickly as possible. While retirement plan participants have received a reprieve in some situations such as what happened with Stockton, the overall funding crisis is likely to reverberate in ways that could lead to future skirmishes. Witness what is happening right now, courtesy of the U.S. Congress. According to "Pension Bill Seen as Model for Further Cuts" (December 14, 2014), Wall Street Journal reporter John D. McKinnon portends future diminutions in employee benefit payouts if such action is deemed to prevent the "failure of just a few" plans being able to destroy "the federal pension safety net" (i.e. the Pension Benefit Guaranty Corporation). While the focus of lawmakers right now is on corporate union plans, it is not much of a stretch to imagine certain reductions being allowed throughout the United States and in other countries, postured as protection for the "greater good."

In case you missed it, March 20, 2014 was International Happiness Day. Sponsored by the United Nations International, the Day of Happiness is a reminder that there are lots of good things in this world and a moment of reflection is a nice way to celebrate our gifts. Interestingly and not surprising, eighty-seven percent of people who took the online poll at www.dayofhappiness.net say that happiness trumps wealth. Is this bad news for the financial community? No it is not and here’s why.

Research studies repeatedly link emotional well-being with economic productivity. In his informative book entitled "What Happy Companies Know: How the New Science of Happiness Can Change Your Company for the Better," Dr. Dan Baker (with Cathy Greenberg and Collins Hemingway) extols the virtues of businesses that recognize the importance of motivating workers with carrots and not sticks. By extension, happy workers will remain employed and their incomes typically rise as they carry out their duties with a smile. This is great news for the advisers who want to help those with money to invest.

Happiness is certainly a big business. A quick search of Amazon.com for books on this topic yields nearly 40,000 results. There’s even a magazine called Live Happy. One of my favorite tee shirt companies is called Life is Good. You can watch "The Economics of Happiness" documentary and follow along with a study guide.

Some people keep a gratitude journal. Setting aside a few minutes of quiet time is likewise popular. ABC reporter Dan Harris must have struck a nerve as his book about meditation is a best-seller. Click to learn more about his 10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works — A True Story.

As readers of this blog know. I am a devotee of yoga and try to take a class whenever I can. My reasons include a desire to be fit and numerous advantages of taking deep breaths and focusing on the moment. The boost to concentration levels, especially for challenging projects, is a significant plus. The medical community continues to pay attention to the benefits of mindfulness. In late 2013, Bloomberg wrote about Harvard Medical School researcher, Dr. John Denninger, and his research about yoga, brain activity and immune levels. Since six to nine out of ten visits to see a doctor are cited as stress-related, costing companies roughly $300 billion per year, his federally-funded science can be helpful indeed to both individuals and employers. See "Harvard Yoga Scientists Find Proof of Mediation Benefit" by Makiko Kitamura (Bloomberg, November 21, 2013). Also check out "Take a Deep Breath," posted on the American Institute of Stress website.

Have a good day!

If you escaped the flu bug this year, congratulations and best wishes for not getting sick in the next few months. Unfortunately, I was not as lucky. After five tough days of sneezing, coughing and aching, and despite getting a flu shot, I am finally feeling better. I still don’t know the culprit other than possibly riding a crowded train last week. Why visibly sick passengers were out and about was a mystery to me until I read "Sniffling, Sneezing and Turning Cubicles Into Sick Bays" by Michael Mason (New York Times, December 26, 2006). He explains that the tendency for employees to show up at work has to do with economics.Some companies do not offer sick pay and days missed translate into a smaller paycheck. In other cases, people tell survey-takers that they feel pressured to show up and fear possible suspension or being fired if they miss work. When companies offer PTO or personal time off, workers may opt to punch the time clock rather than give up days that could instead be spent on vacation. Some companies may not have a telecommuting policy or technology that supports work at home. Other times, individuals may feel that missing work will put them further behind, especially if their firm has downsized and asked those who remain behind to make up the difference.

In what has become known as "presenteeism," the act of attending work while sick has drawn attention from benefits professionals and researchers alike. Companies that scale back benefits may do so to cushion the bottom line but end up losing money. This is because workers who show up sick often underperform while on the job and then infect others around them who in turn get sick and underperform. According to "Unhealthy U.S. Workers’ Absenteeism Costs $153 Billion" by Dan Witters and Sangeeta Agrawal (Gallup.com, October 17, 2011), the cost in lost productivity "would increase it if included presenteeism, which is when employees go to work but are less productive in their jobs because of poor health or wellbeing."

Occupational psychologist and founder of a website about work-related behavioral issues, Rebecca Quereshi writes that the topic is viewed differently across countries. She asserts that the UK and European study the "precursors of presenteeism" or why people are compelled to show up to work when they are sick. In contrast, the U.S. focus is on the productivity loss attributable to presenteeism. She adds that "There is widespread agreement that presenteeism accounts for more aggregate productivity loss than absenteeism," in large part because it is "much less accounted for." See "Presenteeism in the workplace, reviewed" (January 19, 2011).

In other articles read by this blogger on the topic of healthcare and the bottom line, the point was made that those who make higher incomes may be more inclined to show up at the office when feeling less than robust. Perhaps that is true but what is known for sure is that bad health impacts the bottom line. According to its September 12, 2012 press release, a study conducted by the Integrated Benefits Institute cites absenteeism and presenteeism as contributors to a loss of $227 billion to the U.S. economy.

As companies grapple with new health care rules and regulations and the challenges of a fragile global economy that keeps everyone on a tight budget, individuals are best served by going on the offensive in terms of trying to avoid a cold or the flu. Chicken soup anyone?

My client conversations are mainly with financial professionals and attorneys. However, as someone who wants to stay informed about the economy, I likewise enjoy getting different perspectives from market participants, especially those who are directly impacted by changing rules and regulations. So it was with interest that I read the following note on my doctor’s pay window:

"Dear patients –

As of October 1, 2010, I no longer accept Medicare insurance due to the harassment and cuts in payments by the federal government. My fees are very reasonable. Please feel free to discuss them with me personally. I would love to continue to care for my Medicare patients, just without the federal government telling me how to do my job or how much to get paid. This is just the beginning of the healthcare reform. Please thank your politicians. Remember, elections have consequences."

Whether you agree with him or not, the reality is that, like any regulation, there are unintended consequences. When you deny someone the opportunity to earn a risk-adjusted return, don’t be surprised that some individuals exit the market and seek gainful work elsewhere. If true that large numbers of physicians are no longer "supplied" at the same time that health care mandates force demand upward, it’s obvious that prices are going to spiral. To the extent that regulations keep prices in check, even more doctors will get discouraged, leave the industry and put more pressure on the demand-supply gap.

According to "The Coming Doctor Shortage" by Herbert Pardes (Wall Street Journal, January 19, 2011), "Health-care reform will add an estimated 32 million people to the ranks of the insured, driving them to seek medical attention that in the past they may have avoided due to expense." In addition, an aging populace adds to demand even as nearly a third of doctors in the United States are older than 55 years with plans for retirement at some point.

The math is straightforward.

  • 250,000 doctors will retire within the next decade.
  • Increased needs require "an additional 130,000 doctors, both general-practice physicians and specialists, 15 years from now."
  • About 16,000 doctors are trained each year.

Besides those doctors who are throwing in the towel, I’ve talked to quite a few who are discouraging their relatives, friends and family members from studying medicine.

If things don’t correct soon, fewer rational individuals will be willing to incur large personal debts and study long hours to become doctors. If that happens, "do no harm" may be the reality of too much legislative interference.