Focus on delivery as much as cost in delivering financial education

Employee Benefits Financial Education Supplement coverWhen planning a financial education programme, employers must base their decisions on more than cost, and also look at how best to deliver information to staff, says Kirstie Redford

While a lack of financial know-how among employees can often result in a failure to fully appreciate the value of the benefits on offer, it can also have major ramifications on workplace productivity as staff may find themselves suffering from stress due to money worries.

As a consequence, more employers are becoming interested in providing some level of financial education to eliminate these problems and empower staff to make the most of the perks on offer.

When considering implementing a financial education programme, it’s important for employers to understand how far they can go before delving into the realms of financial advice, which they are generally not qualified to provide. Financial education means providing employees with factual information, not advising them about what decisions they should make.

Charles Cotton, reward adviser at the Chartered Institute of Personnel & Development, warns: “Employers need to be clear about what they want to provide and why, and that they do not stray into providing regulated financial advice.”

If organisations want to supplement an education programme with access to advice, then they will need to call on the services of an independent financial adviser regulated by the Financial Services Authority (FSA).

When implementing an education programme, employers will need to decide whether to focus their provision around specific events, or to adopt a more holistic approach by introducing a long-term, more integrated initiative.

For event-led programmes, common triggers will include changes in the benefits package, the launch or maturity of share schemes, retirement or redundancy. The advantage of going down this route is that employees have a vested interest in receiving information at any of these specific times.

Tony Newman, employer solutions manager at Close Wealth Management, says: “If you provide general seminars all the time, even with the best intentions, not that many people will usually turn up. [Employees] need an incentive. If, for example, your share scheme has just matured and there’s a possibility you will have to pay capital gains tax, you’ll attend.”

However, Cotton argues that if employers only provide event-led information then the financial education can become disjointed and appear tactical to staff. “It’s best to start education as part of the induction process. Graduates may come to the company laden with debt issues and as they progress they may want more information about saving for a house and then for retirement. It’s best not to be too prescriptive,” he says.

Mark Sheppard, a partner at consultancy Copperfield Communications, agrees that financial education should not just focus on the benefits package, but go a step further so that employees can personalise the content to their own situation. He suggests providing education in areas such as saving and investing, debt management and general financial literacy.

“Trying to load all the facts and figures into a few event-based communications simply does not work. Employers need to take into account which media and channels will work best in their organisation and then figure out how to use these to build financial knowledge, literacy and capability,” he says.

The avenues through which employers choose to convey financial information and guidance will often boil down to logistics, says Fiona Downes, head of employee share ownership at ifs ProShare. “Some employers could have employees on a number of sites and many have nationally or even internationally-mobile employees. This means that the mechanisms used need to be flexible and accessible.

“Whether the programme takes the form of face-to-face education, workplace seminars, online programmes or a combination of these will depend on the type of organisation and their employees,” she says.

Delivery methods will also depend on the budget and other resources available. If employers have in-house expertise they can provide their own seminars or one-to-one surgeries where staff can learn more about how financial products work.

Close Wealth Management’s Newman is a keen advocate of seminars. “The internet and DVDs have a place and tools such as mortgage calculators can be helpful, but are rarely used. People respond better when there’s an expert talking in front of them for a couple of hours.”

As a first port of call, employers may turn to the providers of financial products offered through their benefits package. Many will be all too happy to provide literature, e-learning tools or come into the workplace and explain how employees can get the most out of their products. This goes for voluntary as well as paid-for benefits. Worksite marketing can be big business and more providers now realise that if employees are being introduced to financial products, they need to be financially aware so they can make informed choices.

However, some employers may prefer to get an independent external supplier involved to provide more generic financial education. If they have a budget there is a plethora of services out there to choose from. For example, Close Wealth Management and JPMorgan Invest provide a variety of services, from in-house seminars to DVDs and webinars.

While bespoke arrangements can be made for a financial education programme, a standard three-hour seminar can cost around £200. If going down the seminar route, it’s important for employers to ensure that they are not too big. “I’d recommend no more than 24 attend a session. Also consider who attends – most people won’t feel comfortable asking questions if their managing director is in the same room,” says Newman.

Where regulated financial advice is to be provided as part of the programme it is important to ensure staff understand how the adviser is being paid and whether any commission is involved.

Employers may also want to consider providing financial support through an employee assistance programme (EAP). Some offer phone lines that provide debt advice or counselling to help staff get a handle on their financial problems. For example, EAP provider ICAS provides access to its helpline LifeManagement Services, which connects callers with general money management consultants or regulated independent financial advisers, depending on the query. “Accessing this service enables clients to talk through their options either before they consult a financial adviser of their choice, or if they are seeking a ‘second opinion’ consultation. They then gain a deeper understanding of their financial options,” says Pam Whyteleaf, head of LifeManagement Services at ICAS.

E-learning solutions can also be helpful. For a low-cost option, charity Life Academy provides a website called Let’s Talk About Money, a workbook and a CD-Rom, all focusing on financial education. The website is free to access, the workbooks cost £8.50 and the CD-Roms £19.99, with discounts available for large quantities. Employers can also pay a small charge to place the website on their company intranet. The charity also provides speakers and tutors that come into the workplace for a fee. A standard two-day course with two tutors for around 16-20 people would cost around £1,650 plus value added tax (VAT).

Employers may also want to take advantage of free services currently being provided by the FSA, which is heading an initiative to improve financial capability. The FSA is delivering copies of its Make the most of your money booklet or CD-Rom to thousands of workers through employers and intermediaries. Andrea Kinnear, spokesperson for the FSA, says: “We [also] aim to present the Make the Most of Your Money seminar to 30,000 employees and for 50,000 more to watch it in on CD-Rom.”

The government is also taking financial education seriously and last year commissioned Otto Thoresen to examine the feasibility of delivering a national approach to generic financial advice. Thoresen’s final report was published last month and recommended a free national money guidance service be put in place with the costs to be borne equally by government and the financial services industry.

However, organisations may still need to develop their own financial education programme if they want to ensure their staff fully understand the value of the benefits they offer and how to make the most of them.

Issues to consider when implementing a financial education programme

1. Identify your target audience. Will the financial education programme be aimed at specific groups or the whole workforce?†

2. What resources and budget do you have?†

3. Work out how to deliver a plan. Will you use seminars, one-to-one sessions, or e-learning?†

4. How will the programme be delivered: through an external supplier or in-house expertise?†

5. Will you provide generic education or access to regulated financial advice?†

6. Will the financial education be planned around an event or an ongoing programme?†

7. Will staff be able to take paid time off work to attend financial education seminars?†

8. Identify the type of communications that are to be used. How will you increase awareness of the programme?†

Case Study: Xyratex Technology

Xyratex Technology introduced a financial education programme in order to boost employee understanding and appreciation of its non-contributory group personal pension (GPP) scheme.

This was implemented alongside a review of its GPP, which began in 2006 and involved a move from two providers to one.

Peter Joinson, director, global HR strategy, said that the objectives behind its financial education strategy included increasing employees’ understanding of pensions, to help staff be on target to achieve their desired retirement income and to obtain better feedback on how much staff valued the GPP.

The scheme, which was implemented by May 2007, initially involved group meetings for employees which covered savings options and information about the company’s pension plan. These were held during working hours by advisers Secondsight and, while attendance was not compulsory, it was strongly encouraged, explains Joinson.

These presentations were followed by compulsory one-to-one sessions with an independent financial adviser (IFA) for all 560 staff, which were company-funded and provided by Foster Denovo.

These covered issues such as setting a target retirement income and making affordable contributions in order to achieve this goal.

The IFAs also explained how Xyratex Technology’s salary sacrifice arrangement around pension contributions worked.

Joinson explains that the strategy has helped to increase take up of the pension scheme, employees’ appreciation of the perk, as well as the number of staff who are on target to meet their desired retirement income. “I’m pleased employees are thinking more about their pension. The trick now is to keep it alive,” he says.

The company now runs annual group meetings on the pension for employees, while all new joiners are given an individual advice session with an IFA.

All staff who leave the organisation, are also given a company-funded session with an IFA to discuss options around their pension, such as transferring the fund to their new employer.

Employees that wish to discuss other financial matters with an IFA can also arrange further meetings, however, they must cover the cost.

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