Why employers need to follow financial education rules
I recently saw a slim, tall, fawn-coloured young Spanish Podenco dog called Lucy. This isn’t really about Lucy, but that sentence follows a linguistic rule you may not even know exists – but that you follow all the same.
"I met a Podenco dog, Lucy, fawn-coloured, tall, slim and young", has the same information, but feels wrong. Sometimes even if we do not know the rules, or how to articulate them, we automatically follow them. When we can share methods of communication that we all understand it helps everyone.
Sadly, financial education, including guidance, coaching and advice, are the complete opposite of this. We quickly run into roadblocks such as what are you allowed to say? How do its components differ? In short, what are the rules?
I am not going to focus on why financial education is important. Nor will I focus on the ‘how.’ There are things to consider when constructing a financial wellbeing strategy, some of which I outlined at the recent REBA Wellbeing Congress. The best ways to communicate a financial wellbeing strategy are also detailed in this article by Alessandra De Santis from Caburn Hope, who, like Buck, are a Gallagher company.
When it comes to creating a financial wellbeing strategy, employers need to understand the differences between education, guidance, coaching and advice, and how and where to use them.
Education
Through financial education, you are providing facts or context. As an example: Your pension is with Aviva and helps you save for retirement. Your medical insurance is with Bupa and gives you access to medical treatment. Increasingly, it may focus on objectives, such as looking at the steps involved in buying a house.
Employers can and should offer this, and it is often provided through an intranet or flex platform. By providing financial education, employers can ensure that their employees know which financial tools and benefits are available and the purposes they serve.
Guidance
Closely related to education, guidance assists people in making the right choices for themselves. However, it must be broad, vague and avoid specifics. You can offer guidance about how to do things, by outlining the options available and providing FAQs. For employers, this is often where signposting comes in.
For example, buying a house. You can educate on the different types of mortgage, detailing that you will need a deposit, signpost your discounts platform to help employees save money and help them learn how to budget properly. You can explain the existence of Lifetime ISAs, show them a video of a webinar on mortgages, or link to the mortgage brokering service you offer.
You are guiding them towards things that can help and assisting them to act. You may even connect them with third parties who offer coaching or advice. But you are not recommending one thing over another.
With joined-up thinking, communication resources and good technology, this can be highly effective in helping employees make good financial decisions. Employers can and should do this.
Coaching
Coaching is a growth area with an increasing number of providers. This is usually a one-to-one interaction, where an employee gets personalised help. Coaching will stop short of recommending specific providers, but will focus on actions to take.
With buying a house, coaching would help put a target on a deposit level and how much can and needs to be saved each month to achieve that. It is usually ongoing, to help employees stay on track. As the name suggests, this is the personal trainer of financial education.
While employers will not be directly involved, they can facilitate it.
Advice
There are different types of financial advice. It may be restricted to offering specific services, or working from a list of providers to offer independent advice across multiple areas, on a whole-of-market basis. The principles are the same.
Advice provides a personalised recommendation to act with a specific provider, using a regulated financial product. Considering your goals and the best way of achieving them, advice recommends what to do and who to do it with. For example, you should take out a fixed rate mortgage with a particular bank.
Even facilitating advice for employees can be a challenge – certainly at a holistic, universal level – as provision across all employees must cater to a vast range of requirements. But you can connect people with third parties. This tends to mean supporting access to advice in targeted areas, like at-retirement decisions or an independent mortgage broker. Employers can support employees with how to get financial advice: what it is, how it works, what to expect, and the process involved.
Advice is the gold standard of financial education, but employers must ensure that such personalised support is undertaken in the appropriate way, with adequate resources to do so.
Good financial education connects your benefits with employees’ life objectives. Doing so will help them achieve their goals. Education, guidance, coaching and advice all have a place. Employers should look to facilitate them where they can, but know that there are rules to follow which are not always intrinsically understood.
We know from our story about Lucy that even when the same information is delivered, doing so without following the rules can cause problems. In a regulated world that means more than a confusing sentence. Learn the rules and your comprehensive, generous, flexible, modern benefits offering will have a greater impact.
In partnership with Buck
Buck is a global, integrated HR consulting, benefits administration & technology services provider.
