Financial Wellness or Legal Minefield? Hidden Risks in Employer-Sponsored Financial Programs
In recent years, “financial wellness programs” have become a hot trend in employee benefits. Marketed as tools to improve employee retention, reduce financial stress, and promote smarter money management, these programs are often bundled with investment advisory services, insurance offerings, or “free” financial consultations.
But behind the polished presentations and buzzwords lies a growing legal risk for employers—and a potential trap for employees.
At Parker Daniels Kibort, we’ve seen firsthand how these well-intentioned programs can expose employers to fiduciary liability and lead to significant financial harm for employees. Here’s what every business owner, HR director, and employee should understand before signing up for—or sponsoring—a financial wellness initiative.
- Who Is Really Being Served? Understanding the Business Model
Many financial wellness vendors operate under a dual-registration model—as both fiduciary advisors and insurance agents or brokers. That means they may earn commissions on insurance or investment products while purporting to offer “unbiased” advice.
While the initial consultation may seem educational, the goal is often to steer employees into purchasing high-commission products such as:
- Whole life or indexed universal life insurance policies
- Annuities with surrender charges
- Non-traded REITs or private placements
- Premium financed life insurance products (a subject we’ve explored extensively)
If an employee makes financial decisions based on advice from someone who is both “advisor” and “salesperson,” the potential for misrepresentation or unsuitable recommendations increases significantly.
- Employer Liability: ERISA and Fiduciary Exposure
Under the Employee Retirement Income Security Act (ERISA), employers have a fiduciary duty when offering certain types of financial benefits, particularly if they sponsor or endorse specific investment products or advisors.
By partnering with a financial wellness provider that cross-sells high-risk or high-cost products, employers may inadvertently assume fiduciary liability for:
- Failing to perform due diligence on the provider’s compensation structure
- Failing to monitor the suitability or performance of recommended products
- Facilitating undisclosed conflicts of interest
In extreme cases, this could expose the employer to class action litigation or Department of Labor scrutiny.
- The Employee’s Perspective: A New Source of Suitability Claims
Employees, especially those with limited financial sophistication, may assume that advice given through a company-sponsored program is trustworthy. But when the “advice” leads to unsuitable or high-risk products, they may have legal claims for:
- Breach of fiduciary duty
- Negligent misrepresentation
- Failure to disclose material risks or conflicts of interest
As I’ve written in my recent blog on Customer Suitability Claims Against Financial Advisors, advisors must know their client’s full financial picture. This duty doesn’t disappear just because the advice is offered under the banner of a workplace “wellness” initiative.
- Due Diligence for Employers: Red Flags to Watch
If you’re considering offering a financial wellness program, here are some best practices:
- Vet the Advisor: Are they fee-only, or do they earn commissions? Ask for full disclosure.
- Understand Compensation Models: Are employees being pitched products with surrender charges, undisclosed fees, or premium financing arrangements?
- Get it in Writing: Ensure all marketing materials and disclosures clearly outline whether the services involve fiduciary advice or sales.
- Insist on Employee Education, Not Product Sales: The goal should be empowering your workforce—not monetizing them.
- For Employees: Ask the Hard Questions
If you’re approached through your employer to meet with a “financial coach” or “advisor,” don’t be afraid to ask:
- Are you compensated if I purchase a product?
- Are you a fiduciary 100% of the time?
- What fees or commissions will I pay?
- Can I get a second opinion from an independent advisor?
If something feels too good to be true, it probably is. Seek outside legal and financial advice before signing on.
Final Thoughts
Financial wellness programs can be valuable when structured ethically. But when profit motives creep into the advisory process, the risks—for employers and employees alike—can quickly outweigh the benefits.
At Parker Daniels Kibort, we represent clients in complex financial services litigation, including suitability disputes, ERISA fiduciary claims, and premium financing misrepresentations. If you have questions about your financial wellness program—or concerns about past advice you’ve received—contact us for strategic, knowledgeable counsel.
WISE COUNSEL. WINNING RESULTS.
Mr. Kibort practices in business litigation and financial-services litigation, including representing customers who have suffered damages related to unsuitable investments, misrepresentation, failure to disclose, and premium financed life insurance schemes, as well as defending advisors and firms against allegations of unsuitable investments, misrepresentation, and failure to disclose.
This blog entry is not legal advice and does not create an attorney-client relationship; it is merely an example to provide some legal education. It is simply intended to provide general information. Each case is fact specific and requires its own unique solution. It is strongly recommended that you seek the advice of a qualified attorney to help you with any questions you have.
Parker Daniels Kibort is a full-service litigation law firm located in Minneapolis, Minnesota. We have a proven record of success at the highest levels for our clients. We can handle your matters in Minnesota, Wisconsin, North Dakota, California, and Washington D.C. For more information, contact us at 612-355-4100.
