Summary box:
- Initiatives including auto-enrolment, changes to the state pension and the most recent pension freedoms have driven an increase in demand for financial education.
- But not all financial education solutions are equal and some may not engage with all staff within an organisation and so may not drive the best return on investment or outcomes for those affected.
- Selecting financial education that best fits an organisation’s strategic aims and needs is the first step of delivering that return on investment and there are a few simple steps for organisations to be aware of when making those choices.
Recent pension freedoms have raised the need for increased financial education and advice. While the majority of employers have always seen financial education as a desirable support, it is only recently that more are now seeing this as essential, and this has brought a change in the world of financial education. The Employee Benefits/Close Brothers Pensions research 2015, published in November, showed that over 50% of employers have communicated the pension freedoms to all their people, 76% believing it is now essential to provide financial education to all staff. In addition, 27% are looking at introducing pension engagement exercises for all staff and a third of employers are seeing an increase in interest in pensions from younger staff, according to the Close Brothers Business barometer research published in July 2015.
As with all things in a free market, an increase in demand is leading to an increase in supply, with some new providers entering the market and some existing providers aligning themselves to it. Any increase in education is a good thing but as employers are now faced with more choice, there is a real need for clarity and understanding on how to select the best financial education for their organisation and what they can expect in the process.
The starting point is that not all education is equal. Most employers looking to provide financial education want it to cause real and positive change; better-informed decision making, an increase in financial wellbeing, improved engagement, staff retention and so on. Most employers do not approach this just as a box-ticking exercise. With this in mind, there are some vital points that need to be on an employer’s checklist:
First, one size does not fit all: like people, organisations are unique. Although there are some common trends within industry sectors, an organisation’s culture overlays this and adds a unique quality to its strategic aims and its attitude to supporting its people. A financial education programme must be able to recognise, reflect and fully leverage this uniqueness. A tailored approach designed to meet an organisation’s specific needs will be more successful than an off-the-shelf product.
Second, initial engagement is key; if the target staff do not access the financial education provided then it will not be successful. Initial engagement is one of the hardest things to crack. One-dimensional financial education will not speak to everyone and rarely will one method of communication, such as an online platform, engage with a whole staff demographic. People take on information in different ways, so multiple channels should be used and direct, face-to-face contact still delivers the best form of learning and engagement and is preferred for complex or sensitive messages.
Third, technology should be embraced and used tactically but it will rarely be the only and overriding strategy. Modellers, apps, social media, online interactive tools and gaming have their place but they are far from the full solution for everyone.
Fourth, information on its own will not be enough. People need to be inspired to act, they need to see how to join the dots and use benefits to improve their own finances and some will also need help to make those changes.
Fifth, access to implementation is vital. If the education works, an employer will have a group of informed and inspired employees who want to make a change to their financial wellbeing and who are ready to make that change. If they cannot, then instigate those changes or get help to do so, because the financial education programme will fail. Implementation is a crucial part of financial education for individual staff, so any education provision must have enablement at the end of it.
Finally, experience is key. A provider which is experienced in delivering financial education will know what works and what does not and will be able to apply best practice to deliver a greater return on investment and improved outcomes for staff and the business.
The fact that more employers are now looking to introduce or expand financial education for their people is a great outcome of the pension reforms. Employers looking for a provider for the first time need to be aware that not all financial education is equal and that a one-dimensional solution, such as an online platform, may not deliver the best outcomes for their people or their organisation.
Jeanette Makings is head of financial education at Close Brothers Asset Management.
