With a growing interest in financial wellbeing and financial education, more providers are entering this market and others are now using it as a wraparound descriptor for their services. But with increased choice there can be confusion, so here are five ways to navigate the market noise.
Address the biggest risk area first: with conflicting demands, it is sometimes hard to know where to begin so start by addressing the group who are potentially in the most danger, retirees. Retirees have spent their whole working life building up their pension savings and now, without proper guidance, they could make potentially catastrophic decisions and ones that they are unlikely to be able to reverse or recover from. So if nothing else, a financial strategy needs to start with supporting retirees to understand their choices and to make informed and well-supported decisions at retirement.
The missing piece of wellness strategies: organisations are now realising that wellness is holistic and co-dependent; physical, emotional and financial health work together and if one is missing, this imbalance may also impact the other two. Financial health has traditionally been seen as a standalone provision, rather than an integral part of overall wellness. Financial wellbeing has been the forgotten piece of overall wellness strategies but that is now changing with organisations now looking to use financial education as part of improving their financial wellbeing and as a piece in their overall wellbeing strategies.
There is no holy grail: too often providers are one dimensional in their delivery of financial education. For example, they focus only on pensions; they offer solutions only for debt management; their delivery is only online; they offer information but no access to advice or implementation. Financial education is the key to unlocking the value across the whole reward and benefit offering, helping individuals to join the dots of what’s relevant for them and how to use it to improve their finances now and in their future. Of course, communications will vary to engage different staff groups and on different issues but as a minimum they should reference the entire reward and benefits package, they should be multi-channel and should provide staff with a framework to access the guidance and further help they need whatever their life stage, goals and circumstances.
Someone like you: some providers use crowd theory to prompt people to action. Using ‘someone like you’ techniques should only ever be an illustration because from a financial planning perspective, individuals are unique and there is no one like you. Using matching criteria of age and salary levels are crude instruments indeed when two people of the same age and salary may well be unmarried, and divorced; one with a legacy defined benefit (DB) pension, the other not having started a pension; one with inherited health risks and the other not; one with an aspiration to retire at age 60, the other with no financial plan. ‘Someone like you’ when used as a case study or an example is one thing but can be potentially dangerous when applied to prompt financial decision making without any other guidance.
Education, guidance and advice: there is a growing trend for companies to arrange one-to-one guidance and advice in the workplace alongside financial education. The pension freedoms and the reduction in the lifetime and annual allowances have caused an increased need for one-to-one help for those affected and with the tax relief for pension advice now at £500 per person and the ability for individuals to take a further £500 tax free from their defined contribution (DC) pension to fund pension advice, this is a trend that is set to grow.
It can sometimes be difficult to cut through the noise of a crowded marketplace and to decide what is needed, what value it will add and who is best to provide it. At times like these experience and breadth and depth of service counts. A provider who can deliver in every medium; face to face, via web and online; who can employ new technology alongside tried and tested methods to provide both effectiveness and efficiency, and one who can provide staff with advice should they wish to take it is likely to deliver a more successful outcome.
Jeanette Makings is head of financial education at Close Brothers Asset Management
