Using USAA’s Financial Readiness Score
It’s been eight months since USAA launched their Financial Readiness Score service, and I took the opportunity for a followup interview. Susan Owens, the AVP for Enterprise Advice Implementation, dug up the statistics and shared the insights that USAA will gradually roll into the new versions of the program.
USAA has over 10 million members, but they focus most of their attention on servicemembers and families. 75% of USAA’s active-duty members are Millennials, and the Financial Readiness Score is part of a comprehensive financial review aimed at this demographic. 140,000 members used the tool during the last three months of 2015, and a total of 300,000 have used it to date. Over 60% of the members who’ve run their FRS are Millennials, and USAA hopes to boost those numbers even higher in 2016.
The Financial Readiness Score is a self-assessment tool that starts with the information you’ve chosen to share with USAA. It’s available in the USAA mobile app and on their site. It covers four areas: protection (insurance), savings, spending, and documents. It reviews your policy coverage, your assets (including any accounts that you’ve linked for USAA’s goal-planning software), and your monthly payments on your credit or debit accounts. If you’ve created a budget as part of their retirement planning calculator, then that information is checked too. If the program doesn’t find the information already on your USAA account then it’ll ask you a series of questions in these areas. Finally, the software spits out the score (on a scale of 100) along with personalized suggestions for your next steps.
As you might expect, the largest component of your total readiness is insurance protection (42%). Savings is 29% with spending at 20%. Documents are “only” 9%. Even if you don’t have a power of attorney or all of your estate-planning paperwork up to date, you can still score over 90%. Best of all, you’ll see how far you’ve come in your planning and what parts you should work on next.
There are no surprises or failures with this review. As you work through the topics you can see what you’ve accomplished and what’s next. The dynamic algorithm is personalized for life events. Scores will change and might even drop depending on whether a member has married, started a family, left active duty, or retired. It’s not tied to an age but rather to what types of insurance or savings & investments that we’ll need through our lives. It’s a snapshot that’s constantly updated to reflect where we are and where we could be.
After 300,000 runs from members of all life stages, USAA is getting a good idea of what services and products can be the most help. The best score for most users is in the protection category, where the top two products are health & auto insurance. FRS checks not just for having that insurance but also having the right amount during active duty, after active duty, while raising a family, and in retirement. The two most important factors in saving & spending are the household basics of having a budget and an emergency fund. Debt can raise or lower the score depending on how much there is and the payoff progress. The final section of the FRS, documents, has a low score by comparison. If you already have the appropriate life insurance, health insurance, property & casualty insurance, and a budget then you already have most of the documents you’ll need. The document score just checks for the estate planning that you should have for your stage in life.
Average scores for those who’ve completed the FRS are about 60, which means they’re “on the right track”. Ms. Owens says that the FRS is reaching its Millennial demographic: members of the ages 25-34 have the highest scores because they’ve worked through the whole process and the entire list of questions.
USAA’s development team is constantly rolling out improvements to the FRS. Similar to USAA’s calculators for savings goals and retirement, their focus is on usability and ease of completion. The next version will continue to simplify data entry. It already works from whatever USAA products the member currently has, plus whatever investment accounts you’ve linked. The FRS will try to do the calculations for you (like assessing your net worth) instead of asking you to enter your own numbers. If the software doesn’t do it right then you can improve it by entering your own data.
Other new FRS features (coming later in 2016) include gamification and social interaction. You already have a Financial Readiness Score, and soon the program will give you incentives to level up. It might seem silly, but gamer research has clearly shown that badges and awards can change our behavior at all ages. (Do you get competitive about exercise when you’re wearing a FitBit? Yeah.) You’ll also be able to compare your FRS with “members like me” (anonymously) to get a feel for where you fit in with your demographic.
I started my FRS last fall with a 72/100 and I’ve worked my way up to an 85. The biggest gap in my score is our family spending. Now that I charge almost everything on my credit cards linked to my USAA account, it’ll be a lot easier to finish reviewing my budget. (How our retirement budgeting has changed during the last 14 years is an entire other post!) The irony is that my spouse and I are already financially independent and we already have a handle on our budget– yet I still find myself attracted to the tool and motivated to fill out all the details.
Since the FRS is a snapshot of where we’re at, I keep it on the main page of my USAA account for review when I’m on my desktop computer or laptop. The tile is a constant reminder for checking after I read a document or pay a bill.
However the main platform for the FRS is mobile, part of USAA’s “mobile first” strategy for all of their products and services.
I’ve only owned a tablet for about four years and a smartphone for a year, but I have to admit: financial planning and insurance have become a lot more convenient with USAA’s mobile app. When I’m reading an eBook or working with my iPad, if my spouse has a question then I can usually answer it right away through the app with just a few taps & swipes. I don’t have to haul myself out of my recliner, pull a file, page through a bunch of paper, or even copy anything off our hard drive. It makes our financial conversations a lot easier, and we’re much more inclined to talk about it whenever it comes up. We no longer schedule financial summits at the dining-room table– and we no longer find excuses to avoid them.
Have you used the Financial Readiness Score yet? What’s your number?
October 2015: USAA Launches New Financial Readiness Score
Figure Out Where Your Finances Really Stand
The Financial Readiness Score launch page
USAA’s Top Three New Products And Services