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When it comes to workplace benefits, health insurance and 401(k) plans just aren’t cutting it anymore. Today’s top startups are exploring additional ways to recruit talent and make sure employees stick around. Enter the latest benefits frontier: financial wellness.

Employers can differentiate themselves by offering financial wellness benefits (like budgeting, coaching and student loan assistance) in a still-competitive labor market – but that may not last as companies increasingly beef up their benefits.

“What's happening in financial wellness is like what happened with mental health [benefits],” Dani Pascarella, a former J.P. Morgan investment specialist who launched a financial wellness startup called OneEleven in 2017, told The Org. ”It was this thing that was nice to have, but now you’re looked at negatively as an employer if you don't offer it.”

Benefit heavyweights like ADP, Bank of America and PayActiv have launched financial wellness programs in recent years. A bevy of other startups have sprung up – or expanded – to fill this rocketing demand. It makes good business sense, since strong benefits can boost an organization’s recruitment, retention and even productivity. People spend an average of seven hours each week dealing with financial problems like debt or emergency expenses, three hours of which occur during the workday, according to the Global Financial Literacy Excellence Center at George Washington University.

But you can’t just mandate a budgeting workshop for your employees and wait for productivity to soar. The Org spoke with two leading financial wellness startups, Betterment and OneEleven, about how companies can best implement and design these programs.

What does “financial wellness” mean?

Let’s start with the basics. At its core, “financial wellness” relates to your relationship with money. It has that can refer to “how secure your money is, given all the variables involving an unknown future,” writes the National Financial Educators Council (NFEC), an organization advocating for stronger financial literacy programs in schools and communities.

The term also acknowledges the emotional aspects of money. The NFEC asks: “Do you have a budget? Do you stick to it? What about your attitude toward money? Does the thought of it make you sick to your stomach, or does it make you come alive?”

Betterment: An established upstart enters the benefits arena

New York-based fintech Betterment has long endeavored to help individuals make informed financial decisions, free of headaches. The startup’s key offering is a robo-investing service. But in 2016, as the company struggled to find a suitable 401(k) platform already on the market, it launched its own benefits service. Now dubbed Betterment at Work, it mainly offers retirement plans for small- and medium-sized companies.

“The expectations of the average worker are really increasing in terms of what their employer should provide to them,” Edward Gottfried, Betterment at Work’s director of product, told The Org.

The benefits unit is driving growth at Betterment, which sports a $1.3 billion valuation and has raised $435 million since it was founded in 2010, per PitchBook data. Today, some 1,400 companies offer Betterment 401(k) plans, Gottfried said.

Student loan solutions

Betterment aims to differentiate itself from other financial wellness options with a new student loan management platform launched earlier this year. It advises users on how to prioritize and pay down their high-impact loans, and it allows employers to match workers’ student loan repayments directly. The market opportunity looms large as young workers increasingly seek out student loan-conscious employers. The average student loan borrower owes $28,950, according to The Institute for College Access & Success, and 41% of these borrowers have been forced to take on a second job since the start of the pandemic because of financial instability, per a recent Betterment survey of 1,000 workers across industries.

Customers like data management startup Cribl have begun offering student loan management alongside Betterment 401(k) plans, while also revamping benefits like medical insurance and mental health care. “It felt like the right thing to do and there was a great response and it was used right away,” said a Cribl spokesperson.

Up next, Gottfried wants to roll out debt management and education savings benefits. Betterment has already made moves to that end: In February, it acquired the customer list of Gradvisor, a platform for 529 college savings plans.

OneEleven: A tiny startup building a big platform

As established players jump to offer financial wellness workplace benefits, tiny startups are also emerging to meet demand. One example is OneEleven, a New York-based startup that’s raised just over $1 million, per Crunchbase.

Founder Dani Pascarella says she became obsessed with personal finance at a young age, watching her single mother work her way up from hourly retail jobs to early retirement. Pascarella eventually landed on Wall Street herself, managing money for billionaires. “Everyone in the world should have access to this service that we're giving out to the top 1% of 1% of people,” she said of her decision to pivot her career to startups.

OneEleven’s core product is an app that offers a plethora of financial wellness services, like one-on-one wealth coaching, access to certified financial planners, goal-setting and educational videos. Companies and universities can sign up to offer the app as a benefit to workers or students, and individuals can also buy it directly. Employers are the fastest growing segment currently, Pascarella said, and they range from small businesses to corporations.

Results appear promising. One employee at Bleeker, a career-advancing organization that offers OneEleven to staff, was able to consolidate loans, stick to a spending plan and move to a more cost-effective living situation thanks to the app. The client also built a $2000 emergency fund from scratch, increased their 401(k) contributions and is on track to pay off their consumer debt, Bleeker said.

Unlike Betterment, OneEleven isn’t laser-focused on student loans – though it does integrate with repayment tools and help with refinancing, Pascarella said. Rather, the founder thinks credit card debt (which can carry significantly higher interest rates than student debt) and lack of emergency funds are more pressing issues when it comes to financial wellness.

“Student loans are not the thing keeping most people up at night when we look at the most serious causes of stress,” Pascarella said. “It's the living life on the edge, it's the ‘I'm overspending and I can't stop, it's ruining my relationships,’ that are far more pressing than student loans, especially when they've been on pause for a while.”

DIY financial wellness benefits

While some startups opt for third-party financial wellness benefits, monthly costs can add up. Betterment’s full platform costs about $130 per month plus a $6 fee per employee, while OneEleven runs about $5 per employee. (Individuals can pay $50 per month for OneEleven’s app if their employer doesn’t offer it.)

As a result, some are building the benefits in-house. One example is Notarize, a seven-year-old digital notarization service valued at $760 million. (The Boston-based startup in mid-June amid a broader wave of tech staff cuts.) In late April, founder Pat Kinsel told The Org that it offers financial education resources in addition to classic retirement savings plans.

“When you have a startup and you're in a battle for talent, you want to eliminate all of the reasons why people would not come,” he said.

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