Spiralling interest rates and a cost-of-living crisis have helped to propel the issue of financial wellbeing — or lack of it — up the corporate agenda.
At a recent Corporate Adviser round table event employee benefit consultants, employers and providers discussed the ways in which they can work together to support employees with this issue — and what services or tools might prove to be most effective when it comes to building more financially resilient workforces.
Several advisers on the panel pointed out the effectiveness of using existing, free, well-resourced independent services such as the government-backed MoneyHelper service, which delivers a range of budgeting and wellbeing tools. Others pointed to information provided by Martin Lewis’s website, Money Saving Expert, and guidance offered though services like Pension Wise.
Gallagher consultant Francis Goss said there was a danger some providers and commercial organisations try to re-invent the wheel when it comes to providing some of this basic information and services.
He also highlighted the important issue of trust. “The thing about services like MoneyHelper is that it hasn’t got a hidden agenda at all.
“This contrasts with the business models of some other commercial financial wellbeing providers, which may be offering tools or services to help people manage their money, but are primarily interested in selling loans or other financial products.”
He said that these financial products may be useful in some cases, for example if an employee is paying an APR of 29 per cent plus on credit card debt and can consolidate this into a loan charging 6 per cent interest. “But the point is that this sort of advice is available from sites like MoneyHelper, but they are not directing you to any one product.”
Product agnostic
LCP head of financial wellbeing Heidi Allan agreed these perceived conflicts of interest can be a problem, particularly when it comes to delivering financial education. Commercial organisations that are providing employee benefits through the workplace should offer independent advice that is agnostic about product, and can signpost to the most useful tools and resources, she said.
However, those on the panel agreed there was a valuable role for commercial organisations to play, not only in providing a more extensive range of financial wellbeing tools, but also helping drive engagement on this issue, particularly through the workplace.
Hymans Robertson consultant James Smith highlighted the fact that employees tend to trust their employer, and this placed them in a unique position when it comes to supporting financial wellbeing.
Smith said that those working across the employee benefit space should be looking to offer “complementary services” to the various free information services that are proliferating elsewhere. He flagged up the fact that individuals are often bamboozled by the sheer weight of information out there. As he pointed out there are now 1.1m posts on Instagram with the hashtag ‘financial adviser’, and a huge number of TikTok posts purporting to offer financial advice or information. “The challenge for many individuals is navigating their way through all this, particularly as there is so much rubbish out there.”
Misinformation overload
This is where the employer, and the suite of benefits and added-value services offered, can play a key role he said. “Employees need help. If there are good resources like MoneyHelper out there we should be signposting them, but we should also be looking to identify potential gaps and providing complementary services.”
Standard Life head of workplace proposition Neil Hugh agreed that financial services companies have a valuable role to play when it comes to financial wellbeing. Employees already look to their employer for key components of their financial
health: be it securing a pay rise, flexible working arrangements or saving
towards retirement.
As a result employer and pensions providers are in a unique position, he said, to offer more comprehensive benefits designed to support financial wellbeing.
“I think we feel there’s a lot of value we can add. Employers are mandated by government to offer a pension, so we are already providing this service, and have a relationship with these pension savers.
“Financial wellbeing is one of the real focus areas for us, and something we wrestled with for a few years, in terms of do we have a right to play in this space and how important was it. We concluded that as a company that primarily focuses on retirement and long-term savings, it was of the utmost importance.
“We feel we have an obligation to support members with these wider issues around financial resilience and wellbeing. We think this is already the case without the new Consumer Duty rules coming in, but it is certainly interesting to look at it through that lens.”
Hugh agreed that there was a plethora of products, services and tools when it comes to financial wellbeing, which can cover everything from help with basic budgeting, managing debt, and building sufficient savings to more complex queries around tax issues when taking pension benefits.
Personalised solution
“I’m a little bit weary about a one-size-fits-all approach though. Services like MoneyHelper are clearly valuable, but they are not going to be able to fit or meet everyone’s needs.” He said services like this won’t be able to offer the degree of personalisation that many employees need and want.
Centrica’s director of pensions Ross Matthews said that forward-thinking employers now recognise the importance of supporting financial wellbeing, and the benefits it can potentially deliver, in terms of a more engaged and productive workforce, as well as helping with the recruitment and retention of key staff.
However, he said that there may be cost constraints when it comes to delivering solutions, as well as concerns about stepping into the minefield of financial advice.
Matthews said employers like Centrica are conscious of the duty of care they owe their employees. “If we are going to point employees in the direction of a profit-making company, it is important to know that they’re independent and are not going to try and flog you a financial product off the back of this relationship. This will break the trust with the employer and once broken it is very hard to get back.”
However he added that while this can lead to some employers stepping back from this area, this can also create problems, with employees potentially seeking financial information elsewhere – perhaps from those aforementioned TikTok posts, which may not necessarily be helpful or appropriate.
Goss said in his experience employers want to give people the tools to enable them to make better financial decisions, “but they don’t want to be telling them not to buy that TV, for example. Ultimately it’s the employee’s responsibility not the employer’s, though more are looking to help support staff with these decisions.”
Matthews added that for employers, supporting financial wellbeing was a “balancing act” between spending and potential outcomes.
ROI questions
Consultants agreed that better measurement of outcomes could lead to wider take up. Isio partner and head of DC pensions Richard Birkin said: “More employers want to do the right thing for their staff when it comes to financial wellbeing. But I think there is a spend issue in the current climate. They want to know what they are getting for the money invested and there isn’t always clear evidence on this right now.”
He added that this is something consultancy firms like Isio are working on. “I think we could soon have some really clear evidence that if you spend this, this is what happens in terms of outcome for members. This should certainly help open more doors and get more people on board.”
However, Birkin said that it is not all about costs. There are already a range of free tools and services offered, via existing employee benefit packages, but take up and engagement was often poor he said.
Those attending the debate said this could be significantly improved with support from the employer to promote tools to staff. There was agreement that greater personalisation can help ensure these wellbeing services remained relevant to employees of different ages, income groups and backgrounds.
Getting personal
Technology was seen by many as being a key way to deliver this. Isio chief digital officer Vito Faircloth said: “It is this personalisation that is missing in some services at present. And it is hard to provide the right level of personalisation and relevance unless you have a lot of data about that individual and their financial situation.”
Consultants attending the event said this was one area which they anticipated would develop rapidly over the next few years, thanks to big data initiatives and the adoption of AI technology.
Digital solutions
Standard Life is one provider leading the way on this, with its partnership with Moneyhub, which is enabling individuals to pool all their financial data in one place to make better money decisions.
Standard Life’s head of DC workplace new business Ross Willmott added : “This data is useful for many reasons. It allows members to see their financial life in one place, enabling them to budget more effectively.” This is a portal that will continue to develop Willmott said, particularly via open finance initiatives, potentially helping members save money and identify opportunities to boost longer-term savings.
The pensions dashboard — when it eventually arrives — will give pension companies greater oversight of individual’s finances, and which could lead to more tailored wellbeing solutions. But even here the information is still likely to be partial; the dashboard won’t show, for example, if an employee has a buy-to-let property or extensive debts which could impact their financial plans.
However, while consultants thought open finance initiatives could deliver a more personalised solutions, some said there was a need for a more sophisticated regulatory approach, which would include provision for a more simplified advice regime, enabling providers — or tech-based solutions — to deliver more personalised guidance to individuals.
Secondsight employee benefits partner Nick Perry pointed out that the more individualised these approaches became, the more they risked tipping over from ‘guidance’ and information into advice.
There was a potential danger that customers today using more sophisticated financial modelling tools might perceive this as advice. He said: “It’s a very fine line. There’s a lot of good tech out there at the moment and it is getting better all the time.”
But even with better oversight of an individual’s finances he questioned whether pension companies could be expected to say that people should save for a house deposit, rather than topping up AE contributions, or suggest that they may want to use some of the equity in their home to shore up a pension shortfall. “Is that taking a step too far that could be considered advice?” Clients may look at the cash flow modelling and take that as a financial recommendation he said, which could lead to a future complaints if events don’t pan out as they’d hoped.
Those on the panel agreed that pension companies have a key role to play when it comes to financial wellbeing, but this needs to embrace more than just retirement saving. Allan said that pension companies ideally need to be more “agnostic” when it comes to where people were saving, but simply encourage a strong a savings habit to build financial resilience.
“When we are talking about financial education and wellbeing, we need to get away from pensions, and think about everyday savings, medium-term savings and future savings. I think the word ‘pension’ automatically puts up a barrier for some people and may be stopping them from fully engaging.
“There needs to be a more flexible approach. For some people saving for the future might mean boosting pension payments, for others it could be ensuring they are on the housing ladder so they are not renting in retirement, while others may want something far more flexible, for example buying an ice-cream van to be able to supplement their income.
“Give them the education, give them the information, and give them the tools to let them take responsibility for their financial wellbeing.”
Holistic approach
Hugh said that this can be challenging for providers who had traditionally focused primarily on retirement savings, but this approach was evolving. Taking a more holistic approach can help drive engagement, he said. “The first toe in the water regarding financial wellbeing was our Mind Coach. The reason we did this is that we were getting lots of calls asking from members asking financial questions that didn’t directly relate to pensions, for example saving for a property. So it got to the point where we said why don’t we roll our sleeves up and try to provide some answers, rather than just saying we are a pension company.”
Standard Life reports it now has about
250 people a month signing up to this new tool. It is hoped this will drive engagement with longer-term savings products further down the line.
Willmott added that when it comes to tools like this, employer support is essential. “As a provider we can create solutions for employees. But from an engagement perspective and from a take-off perspective this can be difficult if the employer engagement isn’t there.”
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