I’m often asked two questions when discussing the need for a financial education programme: ‘We already have a lot of information on our website and in our pension communications, why isn’t that enough?’ and ‘What kind of value will you add for employees and employers if you deliver financial education?’
These are good questions to ask because they help to frame the purpose of financial education.
The first question is quite straightforward. Providing information only is a passive method of communication, and in most cases ticks all the boxes to satisfy regulatory responsibility. Information comes in many forms but can we really measure the effectiveness of providing a glossy brochure or a document that sets out to explain employee’s options at retirement? Can we be certain that reading a website will support an employee when making fundamental retirement decisions?
In our experience, providing information alone whether it is on a website or a standalone booklet, is largely ineffective and does not help to develop understanding. For example, the BBC confirmed this year that some of the guidance on its pensions website contained information that could have been clearer, which may have led to some members being financially disadvantaged.
However in contrast, proactive and interactive financial education can not only help develop understanding and encourage employee engagement, but is also a catalyst for behavioural change and action. A good education programme will help to bring together all the factors an employee needs to know and understand before making decisions. It helps them, for example, to understand their retirement income options, as well as other key financial planning issues. But how do we measure the value of this?
Collecting immediate feedback at the end of a session is the simplest and most effective way of providing a value measure. Looking at the difference between the knowledge the employee or scheme member believes they have before attending a seminar and then where they feel their knowledge is after the seminar, gives a simple method of comparison. After our financial education seminars we find that on a 1-5 scoring scale, we typically see a big uplift with an average increase of 1.7 in the score.
We also measure whether action will be taken as a result and find that, when asked if they will take specific financial actions following a financial education seminar, attendees typically rate it as either a 4 or a 5 (with 5 being the ‘most likely’). We then find around 60% of seminar attendees on average contact us for further help and guidance, but the overall figure is no doubt higher when we consider the amount of enquiries back to the employer, the pension scheme, existing advisers and Pension Wise.
This is an immediate and effective way to measure the value of financial education and highlights the value of delivering relevant and engaging content, as opposed to standalone information.
Employers and trustees should ask themselves when thinking about their pension communications: Does it improve knowledge? Is it engaging? And does it lead to behavioural change and therefore, further action? If not, is there another option available? After all, a well-planned out financial education programme that ticks all these boxes is a great way to add value for both employers and employees.
Jonathan Watts-Lay is director at Wealth at Work
