Financial education: Be sure to hit your target audience among employees

Making financial education relevant to each employee that receives it is the key to maximising staff awareness and take-up of benefits, says Peta Hodge

Financial illiteracy fuelled the demand for sub-prime mortgage products, led to high personal debts and, ultimately, contributed to the collapse of financial institutions across the world.

That was the conclusion of Axa’s report The roadmap to stability – consumer financial education, published last November, on the back of which the insurance company asked the government, for the good of the economy, to spend £120 million a year for five years to fund financial education, including workplace education for staff. Although there has been no move so far from the government on Axa’s challenge, a number of options are available to employers that want to provide their employees with a basic level of financial education.

This includes employers that may not have a large budget to spend on financial education. The Financial Services Authority, (FSA) for example, offers free workplace presentations for staff. Marie Thomas, senior associate at the FSA, concedes that a short session – which can cover topics ranging from budgeting and borrowing to insurance, retirement planning and savings and investments – is necessarily broad-brush. But she stresses the sessions can “give people the kick they need”.

The more targeted, the better

Nevertheless, the guiding principle behind most financial education programmes is: the more targeted, the better. The more relevant a programme is, the more likely it is the information given will be understood, retained and acted upon by staff.

Many financial education programmes are targeted automatically because they are introduced to address a specific financial event, such as redundancy, retirement or a share scheme payout. Education can also be given to help staff make decisions, such as on an investment strategy for their defined contribution (DC) pension.

In these situations, an employer may feel a duty of care to provide more than just a leaflet to staff making potentially significant decisions. Jonathan Watts-Lay, director of Wealth at Work, says: “Another big one right now is all the tax changes for high earners.”

Even where education is given to address a particular issue, it cannot be assumed that a one-size-fits-all approach will work. An example of this was seen when steel producer Corus worked with the FSA to develop a redundancy version of its ‘Making the most of your money’ course for staff who faced losing their jobs. Most of this group were older workers who had joined the company from school and had been members of the final salary pension scheme ever since. One of the main concerns for many was about managing a large lump sum for the first time in their lives, says Susan Cassar, regional manager at the FSA.

Information for younger workers

However, one of the seven Corus sites where seminars were given, had a lot of younger workers, many of whom had stretched themselves with loans and mortgages taken out in good economic times. These employees needed very different information from their older colleagues.

When structuring a workplace education programme, employers should segment their audience to ensure the messages given are relevant to those particular employees, says Wealth at Work’s Watts-Lay.

Age is an obvious divider. Issues such as debt management, and possibly mortgage advice, might be the priority for many recent graduates, whereas pensions and retirement planning are likely to be top of the agenda for middle-aged staff. Take-up of benefits can be another method. For example, employers can work with members of all-employee share plans as these come up to maturity, covering issues such as what the strike price will be, what the tax implications are, how to mitigate tax and – a big issue at the moment – diversifying out of the company stock, says Watts-Lay.

“Equally, there will be people in that organisation who have never joined the scheme,” he says. “So an education programme for them might be ‘look, there is a new scheme coming up in the next few weeks, let’s talk about the benefits you could get by joining it’.”

One-to-one briefings

One-to-one briefings are often held up as the gold standard of financial education programmes, but Glyn Bolton, associate director at independent financial adviser Clarity, explains: “Seminars can be equally effective if there is sufficient commonality in the audience. The key from our point of view is to remain flexible, tailoring each project according to the population, budget and geography.”

A particularly flexible approach is needed where a large part of the workforce is mobile and out on the road. A good starting point here is to look at what existing communication methods work well. Watts-Lay cites the example of an organisation with a large sales team that rarely travels into the office and, as a result, often feels left out of corporate communications. “It told us a CD was sent out to the sales team every month with all the crucial sales data on it, so we said ‘why don’t we record a webcast and send it out on a CD?’ While undoubtedly this was not as good as being able run a seminar, the success rate was really high.”

Neil Hawkins, head of Friends Provident’s financial education service, says: “If you can actually get in front of people and get them involved, for example getting them to look at picture cards, or write things on a board, you get a much better recall – say 70% – compared to someone just listening, where it might be more like 20%.

But Hawkins recognises this is not always an option. “The challenge is to get the same level of engagement online,” he adds.

Corporate wrap products

Several providers in the market, including Friends Provident, are currently building corporate wrap products, giving employees the choice of short-, medium- and long-term investments, all on one platform, which is sponsored by their employer. “The thing is not just to get people thinking about their pension, which could be years and years away, but about debt management and short-term savings that, hopefully, will get people using the platform on a regular basis,” says Hawkins.

Engagement levels Newer communication channels, such as live webinars, e-tutorials, pre-recorded webcasts, podcasts, dedicated websites and interactive webtools, are all increasingly being included in workplace financial education programmes. Emails and text messages can play a role too, not necessarily to convey complex messages, but as reminders.

The key is to match the communication tool to the message and its audience, and new technology may not be the answer in all cases. “With older blue-collar populations, who have limited internet access, more traditional methods work better,” says Clarity’s Bolton.

“However, we also know that inertia soon sets in,” says Friends Provident’s Hawkins.

“Unless [employers] follow the session up with some sort of architecture that helps people make decisions, they will have wasted their efforts.”

A comprehensive strategy when it comes to workplace financial education can be a formula for success. This can take the shape of a general financial education programme, followed by detailed communication about specific benefits, then by a nudge to employees to take action – all backed up by a good default position so that staff who do not take action are not left out in the cold.

Case study: Blaenau Gwent County Council rates FSA seminars

Blaenau Gwent County Council saw the Financial Services Authority’s ‘Making the most of your money’ seminars as a useful benefit to offer staff at a time when many were feeling the pinch financially.

Julie Morgan, HR manager at the Welsh council, says: “We felt it was a good employee benefit and something that could have a positive impact on employee wellbeing, particularly in these difficult economic times.”

The council liked the fact that the course was free and offered impartial advice and support material to help employees to make decisions.

The sessions also highlight the value of the benefits provided by the council, for example, pointing out to members of the pension scheme that they receive life cover and can save money by not duplicating cover privately.

“At the end of the session, they run through the benefits staff receive as employees of the authority,” says Morgan. “People do not always think of the benefits they already have, so the sessions raise awareness, which is an advantage for us as an employer.”

Case study: Axa ensures engagement with online facility

Axa’s online ‘My budget day’ resource is at the core of the insurance company’s financial education programme for employees.

The emphasis is on continuous financial management, with all employees being allowed to take an hour of their working time each month to use the site, which offers a number of interactive tools targeted at employees at different stages of their lives.

For example, there is one tool to help young staff calculate the cost of getting on the property ladder, while others cover budgeting for families and planning for retirement.

Fun interactive features, such as ‘Could you survive on a state pension?’, are designed to get a serious message across.

The website is supported and publicised in various ways, including seminars and features in Axa’s in-house magazine and an annual ‘My budget day’ each November, when new online tools are launched.

Sonia Wolsey-Cooper, group HR director, says the online system works well because it allows employees to access information at a time convenient to them, without affecting workflow.

“The feedback from our employees has been very positive over the past three years, with many visiting the ‘My budget day’ site on an ongoing basis and reporting they feel more in control of their finances. In turn, they feel more positively towards Axa as an employer.”