How employers can help ‘advice gap’ employees
The UK’s younger employees face a radical new landscape of touchpoints for financial advice. Why and how did these traditional touchpoints change? What was the impact on face-to-face financial protection? And how can employer group protection benefits packages aligned to workplace pension schemes deliver a much-needed safety net?
‘Generation Advice Gap’: millennials with new touchpoints
Market research on baby boomers, Generation X, Generation Y and Generation Rent has become a minor industry, spurred on by the growth of big data from search engines, social media input and other sources of publicly-available information. Demographers and market researchers excel at classifying different generations of consumers into convenient groups to make more sense of what, how and when they can influence or market to these individuals. For the sole purpose of this article, here’s another group you’re probably not familiar with: Generation Advice Gap.
These young men and women are millennials, mainly under 35 and are united by the fact that they are part of the UK’s employed workforce. Many of them live in rented accommodation or with their parents. You know them well: brilliant at multi-tasking on an iPhone XS with one hand while commuting, yet frequently challenged when saving for the future and protecting what they already have.
Why does this talented generation of young men and women appear to receive relatively little face-to-face financial advice? One of the reasons is simple: they lack touchpoints, those magical places where businesses and customers interact at different stages of life’s financial journey. In the recent past, three crucial touchpoints for Generation Advice Gap have been transformed, so let’s examine each one in turn.
Touchpoint 1: Housing and mortgage advice
The UK residential housing market has undergone a radical transformation, particularly in areas where there are plentiful employment opportunities. A toxic combination of soaring house prices and a mismatch of demand and supply has led to a significant drop in younger people who own their own homes. In 2018, for those between 25 and 34, the proportion of homeowners is down from 40 per cent in 2008 to 33 per cent today, according to the Building Society Association’s figures.
With that fall comes a decline in those seeking help at the mortgage advice touchpoint, where financial protection is normally professionally assessed and then offered along with a mortgage deal. For many young people, this was almost a rite of passage before housing became unaffordable to so many.
Touchpoint 2: High street bank and building society closures
If you’d walked down any UK high street or decent-sized village only a decade ago, your local bank or building society branch was there to greet you. Inside this bricks and mortar touchpoint, you’d find an array of insurance-based protection options. From posters, display literature to active sales people, there was every opportunity to learn more about life, critical illness or income protection insurance. UK bank and building society branch closures totalled more than 750 in 2018 alone, and more are planned.
Touchpoint 3: Digital information dominance
Today, it’s likely that Generation Advice Gap consult their smartphones to solve financial problems, rather than asking experts or even close friends. Step back to November 2007 and iPhone’s UK launch was a technological watershed: you suddenly had information on everything, on tap, anywhere, at any time. Ten iPhone generations later and OFCOM, the telecommunications regulator, confirmed in its Communications Market Report (2018) that 78 per cent of UK adults use a smartphone and that 62 per cent of time spent on the internet was on mobile devices.
However, OFCOM also stated that most adults acknowledge its drawbacks, such as interrupting face-to-face conversation with others. The result is that the smartphone’s information-seeking capabilities have, in some cases, eclipsed the conversational, friendly money advice from a parent, work colleague or financial adviser.
Why advice is crucial when there’s no safety net
Changes at these three touchpoints have radically altered opportunities for younger employees to find out more about financial products, which can provide a financial cushion when the going gets tough. Many employees in workplace pension schemes have never spoken to a financial adviser and give little thought to financial planning, even though tailored advice and good quality information could help them make the most of their income and help them avoid financial meltdowns.
The lack of a savings safety net was highlighted in Aviva’s recent research report, Savers vs Spenders (2018). The report found that beyond the money saved in pensions:
- one in five (21 per cent) have nothing saved
- 13 per cent say they have £1,000 or less
- More than a quarter (27 per cent) have £5,000 or less in savings.
These figures show that many people appear unable to save money for the future and that, when things go wrong, they have little room for manoeuvre. And this is where group protection policies linked to workplace pension schemes are becoming crucial.
How employer solutions can help fill the gap
For many employees, employer ‘safety net’ benefits, such as group life assurance, group income protection and group critical illness provided alongside a workplace pension can provide a financial cushion when the going gets tough. Some providers even offer spouse and partner cover as well as critical illness cover for employees’ children. In addition, these products offered through workplace arrangements are more cost-effective for employees, generating company loyalty and value for money at the same time.
The benefits package can be provided in many ways, such as a ‘flex benefits’ arrangement, allowing employees to select cover that’s suitable for them and then increase or reduce it to suit their needs.
From additional income if they can’t work for a while due to illness or injury, to supporting loved ones in the event of death, a flex benefits package aligned to workplace pension schemes can be a crucial safety net when life takes a turn for the worse. For Generation Advice Gap, these employer solutions can be a lifeline, both now and in the future.
The author is Jason Ellis, head of group protection distribution at Aviva.
This is a sponsored article provided by Aviva.
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