Should employers fund financial advice? Pros and cons
We got chatting to a potential new customer about the launch of one of their new employee benefits. They were surprised to find out that far more of their employees took up an offer of a free company-branded hoodie, than the company-funded Income Protection scheme they had recently launched.
Although this may seem nonsensical to the employer, this wasn’t the case for the employee. Many had jumped at the chance to get their hands on a freebie hoodie, but very few had the same enthusiasm for Income Protection. Would an employee really choose a free piece of clothing over their future financial security?
What’s more likely is that the employees were simply not engaged in the concept of Income Protection, it may have been communicated in jargon-heavy language that was uninspiring and ultimately turned them off. It may also be the case that some employees did not know what Income Protection is, and while that is worrying, it shouldn’t come as a surprise.
Cutting through financial terminology
A survey of 1,000 adults undertaken by Norton Finance in 2016 found that many people don’t understand financial terminology as it can be confusing and unrelatable. One in six adults in the UK admitted that they do not know even the most common jargon and abbreviations like ISA and AER. Most people can quickly appreciate the need for insurance once it’s explained to them – but if it isn’t something they’re familiar with, it isn’t mandatory and involves them investing significant time to understand why they need it, then the need to act on it will suddenly disappear.
As the employees we mentioned earlier didn’t understand the value of Income Protection, they chose what, to them, was a more tangible reward. If employers don’t spend the time on communicating the emotional and physical benefits of having rewards, such as Income Protection, their employees may not ever utilise and appreciate how valuable they really are.
The problem with instant gratification
A common problem that we encounter time and time again is benefits programmes that focus their communications solely on what employees want today, not what they need in the long-run. This may explain why we have seen an outburst of instant-gratification benefits which, for example, lend employees money for the latest tech and gadgets, give them two-for-one restaurant vouchers and the ability to upgrade company cars. These programmes, although giving employees what they want initially, have, if anything, damaged the long-term financial health of the workforce.
That’s not to say there isn’t a place for these types of benefits, but there needs to be some balance. Academic report, The best route out of poverty? A study on in-work poverty and policy in the UK by Rob Hick and Alba Lanau, found that a record 60 per cent of British people in poverty live in a household where someone is in work. As a result, we believe that the focus on what is really going to help employees must shift, and employers must tackle what employees need, which is help with their finances.
The Financial Well-being in the Workplace: A Way Forward (2017) report showed that over the past 10 years there has been a 50 per cent increase in the number of employees struggling financially. Despite these stats, Wealth Wizards’ The rise of the non-retiring (2018) research found only 24 per cent of employers are offering any sort of financial advice or education in the workplace. A further survey also revealed that more than 40 per cent of employees feel let down if their company fails to support them with advice on their pension and future finances. Its clear employees want and need support. The employers who are not providing financial advice should consider taking action now, for those who are providing it – ask yourselves are we focussing enough of our communications on this to encourage engagement?
Speaking to employees
We could spend some time telling you how financial advice is affordable (it really is, but we know you’ve heard that before), how it can be offered to your entire workforce quickly and seamlessly (recent advances in technology mean advice is much more accessible than it ever has been) and how it will improve your employees’ financial wellbeing. But ultimately all of these statements only speak to you, directly as an employer. We believe it is the employee, the individuals, who we need to speak to, to show them the ‘human, not finance’ approach to advice, so they can make financial planning as much a part of their daily lives as possible.
We want to help you show them that they can approach financial decisions in the same way as they approach buying a new car or phone; what do they need it to do (provide them with a retirement income, ensure their family is provided for etc) and what can they afford. By doing this we can improve the financial outcomes for employees around the UK and break down the barriers that financial advice is only for the financially savvy.
This article was provided by Wealth Wizards.
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