The latest Principal Financial Well-Being Index reveals steps small and midsized businesses have taken to mitigate financial risks amid market volatility, while employees are concerned about reaching financial security
Despite recent bank failures and concerns around the stability of the U.S. economy, businesses report high levels of growth, according to the latest Principal Financial Well-Being IndexSM (WBI). However, even as businesses are optimistic about their future economic outlook, their employees are anxious about their own finances in the next six months.
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First wave of insights for 2023 (Photo: Business Wire)
To analyze the impact of the bank failures in March, Principal® fielded an additional pulse survey as a part of the WBI between March 24 – 29. The pulse shed light on how and if business sentiment had quickly changed from the first wave of data fielded in February 20231. Despite concerns around the fallout of high-profile bank failures, businesses reported financial stability. More businesses are currently growing compared to this time last year (62% in March 2023 vs. 54% in March 2022).
Businesses anticipate continued growth, with 76% expecting their financials to improve within the next year. That sentiment remains strong when looking across employers of different sizes. Over two-thirds of small businesses2 (69%) and 86% of large businesses3 expect their financials to improve within the next year.
“Businesses continue to navigate roadblocks, including inflation, a challenging labor market, and most recently bank failures, seemingly with agility,” says Amy Friedrich, president of Benefits and Protection at Principal®. “They have shown steady growth through recent events and are using the muscles they’ve built to navigate and quickly respond to the uncertainties coming their way.”
Businesses report concerns over banking sector, but no panic
Employers are most worried about inflation, higher taxes, and a potential recession. Following the recent bank failures, businesses are also concerned about the stability of the U.S. economy (55%) and global financial system (45%). Concerns are heightened among those using a small retail bank4, including the stability of the global financial system (63%), market volatility (54%), safety of their business’s deposits (46%), and having access to capital (45%).
Businesses of all sizes have taken steps to mitigate risk by examining the financial stability of their current bank (32%), collecting outstanding debt (28%), and distributing account balances below the FDIC insured amount (21%) – this action is most common among businesses that use small retail banks (32%).
Employees concerned about reaching financial security
Amid concerns about continued market volatility, employees ranked reaching or maintaining personal financial security5 — defined as having control over regular expenses and enough financial freedom to enjoy life — as their second concern, behind inflation.
Employers recognize the need to support their employees during uncertain economic times – many agree employers should care about their employees’ overall financial security (84%). Most employers (90%) and employees (83%) agree workplace benefits are an important tool to help support employees’ personal finances. Employees identified benefits such as healthcare, retirement, and paid time off as the most important to help reach financial security.
“There’s a need to better educate employees with tailored, relevant information to help them achieve greater financial security,” says Friedrich. “Employers are well positioned as a trusted, accessible resource to help employees achieve greater financial security.”
See the full results from the Principal Financial Well-Being IndexSM Wave 1 (PDF).
See the full results from the Principal Financial Well-Being IndexSM Bank Pulse (PDF).
1 The March banking pulse included input from 500 business owners, decision makers and business leaders, the pulse did not include an employee survey.
2 Businesses with two to 499 employees.
3 Businesses with 500 – 10,000 employees.
4 For the purposes of this study, small retail bank was defined as regional or community based bank focusing on general public.
5 For the purposes of this study, a definition from the Consumer Financial Protection Bureau on financial security was used: “having control over regular expenses, having the capacity to absorb a financial shock, being on track to meet financial goals, and having enough financial freedom to make choices to enjoy life.”
About the Principal Financial Well-Being IndexSM
The Principal Financial Well-Being IndexSM surveys business owners, decision makers and business leaders aged 21 and over who work at companies with 2 – 10,000 employees. The nation-wide survey, commissioned since 2012, examines the financial well-being of American workers and business employers. In 2020, the Well-Being Index was transformed from an annual survey to a regular pulse, offering three waves, revisiting questions and measuring sentiment regarding timely issues in the small and midsized business marketplace. In the first pulse of the Well-Being Index in 2022, the employee audience was added to the survey to compare and contrast key sentiment from employers. The survey was commissioned by Principal® and conducted online by Dynata from February 2 – 7, 2023, with a total of 500 business owners, decision makers and business leader participants and a total of 200 employee participants. The research report focuses on providing a holistic perspective on key trends and timely issues in the small and medium business market.
Principal Financial Group® (Nasdaq: PFG) is a global financial company with 19,000 employees1 passionate about improving the wealth and well-being of people and businesses. In business for more than 140 years, we’re helping more than 62 million customers1 plan, protect, invest, and retire, while working to support the communities where we do business, and build a diverse, inclusive workforce. Principal® is proud to be recognized as one of America’s 100 Most Sustainable Companies2, a member of the Bloomberg Gender Equality Index, and a “Best Places to Work in Money Management3.” Learn more about Principal and our commitment to building a better future at principal.com.
1 As of December 31, 2022
2 Barron’s, 2022
3 Pensions & Investments, 2022
Dynata is not an affiliate of any company of the Principal Financial Group®
Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., member SIPC and/or independent broker/-dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392. Principal Global Investors leads global asset management and is a member of the Principal Financial Group®.
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