It is not every day that one of the biggest financial services companies in the world decides to enter the workplace benefits consulting sector. So the arrival of Barclays into the space is being watched by rivals with keen interest.
The man the bank is backing to lead it into the workplace savings arena, Richard Phelps, head of Barclays Corporate & Employer Solutions, is setting his targets high. Achieving these goals will involve displacing global EBCs from their role as principal or sole consultants to Britain’s biggest companies, with Phelps targeting FTSE100 clients this year.
Phelps, who rowed for Great Britain in the 1992 Barcelona Olympics, is certainly going for gold. He says: “We will be talking to FTSE100 clients in 2013. Will a FTSE100 client mandate us for the full service suite by the end of next year? Unlikely. But I expect part of our proposition will be servicing a FTSE100 client at some time in 2013. And I will be disappointed if by the end of 2014 we haven’t won a client of that size for all the services they need.”
That will involve putting the nose of some of the big EBCs out of joint. “We expect to be engaging with the FTSE100 clients, so yes we do expect to be dislodging some incumbent advisers. Our experience this year has already been that we have taken clients from other advisers. But there is a difference between taking over a client who has been advised by a regional IFA and taking one over who has been advised by Mercers, for example. Our aspiration is to be seen in the same light as the Mercers, the Aons and the Towers,” he says.
Phelps took the role at Barclays’ corporate benefits arm when it was at a very early stage back in January 2011. In January 2013 he will unveil the two pension providers the consultancy will partner with in future. Given he is tying up with a limited number of providers and has poached Mercer’s platform expert Katharine Photiou to fill the role of head of workplace savings, is Barclays ‘doing a Mercer’?
“I would say what we are asking Katharine to do is to go beyond what she has done at Mercer. At Mercer she built a pensions and savings platform. Here I am asking her to build the pensions and the savings component, but there is also the share dealing and the banking,” he says.
Phelps stresses the resources that are already available at Barclays make building a comprehensive benefits proposition more straightforward.
“When Kath walked around Barclays and saw what was here she said ‘most of it already exists’. When she got here she was adamant that you have got to have a leading cash Isa if you are going to put it into a workplace savings package. Barclays is one of the best providers of cash Isas. She said we must have, for the stock and shares Isa, the ability to move the investor onto a share dealing account where they can trade shares afterwards. We have got Barclays Stockbrokers. She was like a kid in a candy store,” says Phelps.
So aside from already having the tools to target the workplace, what was the logic behind the launch?
“We looked at the impact of auto-enrolment and the RDR and what it meant for our clients. We have employers who are clients and employees who are clients. We realised there was a huge opportunity. Overlaying that is a message from the government that says you need to look after your own wealth accumulation. We already do that in the private bank but we can use that know-how across the whole population,” says Phelps.
“Our main function in Wealth is to help with wealth accumulation. And for most of us who do not win the lottery or inherit, the workplace is a key place to be offering services to help that,” he adds.
So how influential was Barclays’ decision to pull back from wealth management in relation to the decision to focus on the workplace?
“I don’t think there was an obvious causal link between the closing of Barclays Financial Planning and the opening of Barclays Corporate & Employer Solutions. This is more about us bringing what we bring in the banking world to the workplace,” he says.
Phelps is keen to stress that his organisation will bring something different to the party.
“If you look at the normal workplace offering it is pensions and savings. Some are trying to link that into employee share schemes. We are going to link all that up to share plans from day one, and we are going to link it up to flex products and personal banking. So an employee who is one of our banking clients will be able to see every aspect of their wealth creation in one place,” he says.
Clients of HSBC Workplace Retirement Services who are on a GPP with the bank can see their pension statement through their banking portal, but Phelps says he is talking about a more holistic view of benefits, although it won’t all be in place until some time next year.
“We are in the process of connecting everything. The share dealing capability is already there, and will be able to do a cash and stocks and shares ISA in April. Not too long after that we will be able to bring it all together in one superhub, with access to Barclays bank accounts,” he says.
For those Barclays customers who work for employers who engage the bank for benefits too, that will add up to a comprehensive and engaging proposition. And if the bank picks up more banking clients as a result along the way, all the better, says Phelps. But data from other banks will not be connected to the system.
Phelps rejects the suggestion that tying with two providers reduces the proposition to employers. “If a client does not want to work with either of these two providers then we are happy to work with a different one,” says Phelps. “We have our two preferred pension providers who we believe will deliver the best service at the best price. But we will be able to go to panel and recommend others if there is a reason why the client would want us to.”
Being a high street bank with hundreds of thousands of business clients gives Phelps a full rolodex of potential enquiries.
“We bank 22 per cent of all UK corporates. It is enough to keep us busy for some time to come. One of the advantages is we can engage with our clients with a degree of prior knowledge. Our corporate colleagues are talking to them day in day out. They know what their issues are. We are getting the message that the FD is aware of auto-enrolment but that it doesn’t bite for 12 months or so. Then when our consultants go in they have had the update, they know what the issues are, what the growth plans are and know the position of the company generally. We can go straight to the key decision-makers,” he says.
The business will operate on a fee-only basis. “Our model is purely fees. Most of the new business we have done has been on a fee basis, and the people we have engaged have all come from fee-based businesses. Our model is charging the same as any other consultancy business at the market rate,” he says.
Barclays has a different model for the SME market, called Corporate Wealth Advisory.
“For the SMEs the people risk is more focused around key man risk. When you are a small company of four founders, protection is the most important thing to you,” he says.
Barclays signed a deal with Aegon in June for key man and other SME business protection products.
Phelps says Barclays’ approach to behavioural finance will be one of its key differentiators from other consultancies, as it will be able to rely on a wealth of academic research on the psychology of saving and how that impacts the workplace.
He says: “One of the benefits at Barclays is we have a fantastic behavioural finance department, full of professors and other academics. One of the themes we look at is akrasia – the fact that we as individuals know doing A is the right thing, but we do B. We know we shouldn’t drink alcohol, but we do. We know we should save, but we don’t. Understanding the mentality around ideas like this is something we can bring to the workplace.
“We can understand the psyche of the employee through fairly simple analysis and questions. Why I think this pensions business is going to become fascinating is because it will become increasingly incumbent upon us to look after ourselves. Wealth accumulation for post work is going to become an increasingly important thing in all our lives,” he says.
He sees wealth accumulation as being more than just pension.
“Isas, cash, shares are all wealth accumulation. We need to get away from seeing retirement planning as just a pension,” he says.
“And the behavioural psychologists view is if the employer has recommended and endorses a provider or service, the belief is a certain amount of due diligence has been done, which you can leverage off,” adds Phelps.
So given Barclays and HSBC are both taking strides into the workplace arena, why does he think that RBS and NatWest are showing less interest?
“To attempt to enter a market that is already dominated by the likes of Towers, Mercer and Aon is no small undertaking. And life offices are also competitors. I have got significant multi-million pound backing from Barclays to do this, to recruit the right team and deliver the proposition. I imagine some banks looked at that challenge and thought that is one project too many.
You cannot enter this light-heartedly. I imagine the banks thought, we need to build something to take on Mercer, and something that will also take on Standard Life and Aviva. They maybe thought its not worth it. We do, and we are here.”
