A couple of weeks ago I went to a talk at the business forum Initiatives of Change UK on Business in the new world economy.
While I found some of the ideas discussed pretty ‘out there’, there was was plenty to challenge the audience to think differently unless we want businesses to simply go back to where we were before the crash and, once again, face the risks that brought us the economic downturn.
The point that really hit home for me was around governance, legislation and compliance and the un-intended negative impact it can have as we tie ourselves up in evermore red tape to protect ourselves from evildoers.
Our speaker, Peter Brew, formerly Ireland, and then North American, CEO of Sedgewick Noble Lowndes (the pensions and insurance firm that merged with Mercer in 1998), used the example of how legislative changes in the 1980s led to changes in the way savings and insurances were sold and the demise of so many mutuals. The unintended consequence was so many people not saving at all. An odd outcome given the intention was to protect these people and give them a better deal.
Although Brew made no reference to the Retail Distribution Review and how it led to the removal of commissions from selling pensions at the end of 2012, I could not help feeling that perhaps we are seeing history repeat itself.
In principle, I am against commissions. But it does concern me, that in a market where so many employers buy pensions and agree annual management charges with advisers and/or providers on behalf of staff, there is so little knowledge among so many employers and their staff on the choices being made.
And, even worse, vast numbers of staff are being cut off from financial advice both via the workplace and in their personal lives (even individuals cannot use commissions to pay for advice). Paying fees is a better deal, but too many people cannot afford them upfront.
The financial services industry now simply chases high net worth individuals, and the mass workplace savings market appears to have lost its attraction.
I can’t help worrying about how RDR compliance might be doing pension savers unintended harm in the long run – the complete opposite of its intention.
My question, therefore, for employers: if you take corporate social responsibility seriously, where do you stand on your responsibility for employees’ financial needs in our current world order?