Around 27 per cent of UK companies are cautious about offering financial advice to their employees due to potential reputation risk, according to new research.
According to Close Brothers’ Workplace Financial Wellbeing Service data, one in three or 34 per cent of UK organisations do not offer financial advice and this increases to 1 in 2 or 51 per cent of organisations with fewer than 500 employees.
The research finds that almost half of these organisations do not intend to offer financial advice as a benefit in the near future. The main reasons are concerns about the risk of providing inappropriate advice and it “reflecting badly on the organisation itself” (27 per cent), and selecting an unsuitable advising firm (21 per cent). Furthermore, 23 percent do not regard financial guidance as a valuable work benefit. Meanwhile, to offer it, one-third of firms would need evidence that employees would use it, while 21 per cent would require employee requests.
The research also identifies a gap as many companies do not provide financial guidance, despite the obvious demand.The majority of those who do are focused on pensions and retirement planning and only 12 per cent of employers offer complete financial guidance to all employees.
Close Brothers Asset Management head of workplace financial wellbeing Jeanette Makings says: “Despite a clear call for financial advice in the workplace, it is evident employers that do offer it are not recognising all employees would benefit from this for all areas of personal finance; the need isn’t limited only to pensions or at retirement.
“And for those that are still shying away from offering it as a benefit, the risk of individuals finding a suitable adviser on their own, with consistent quality, service and price is far greater than the perceived risk of a workplace selected adviser providing inappropriate advice and possible repercussions on the organisation.
“There are over 16,000 financial advisers and advice firms in the UK, of which 82 per cent have fewer than three advisers. When trying to navigate such a complex market on their own, employees are vulnerable to considerable variation in quality, price and service. Having a firm that has been selected by their employer, and where quality, price, service standards and credentials have been reviewed and are monitored, is far preferable.
“When it comes to choosing a provider, note that some may not be able to provide the full range of advice services. So, employers need to understand the range of advice and any limitations of expertise from possible providers. Furthermore, where possible, employers should try not to limit advice to only one area of personal finance, or a segment of employees as this will reduce its reach and impact.”