As both RDR and auto-enrolment get closer by the day it is becoming ever more evident that the workplace will be a key distribution channel for the future. Organisations of different shapes and sizes are adding additional content to their offerings to build levels of trust, confidence and loyalty with employees saving for their future. Scottish Widows and Standard Life through the addition of a wide range of general guidance, Bluefin by providing more ability for customers to set their own investment strategy and regular SMS based content and JLT via some excellent mobile app content to name just a few.
Just providing the pension, it appears is simply not enough. Given the ability of the industry to make pensions a dull and boring subject, this is hardly surprising. A critical question appears to be what is the magic content that employees really want that will make them return to a workplace service again and again.
This throws up one of the perennial questions in the savings industry what are consumers actually prepared to pay for? Historically the industry has made a rod for its own back in providing consumers with the impression that financial advice is something they do not need to pay for.
Either by commission based sales or employers absorbing the cost of benefits consultants, the individual has not had to provide for the cost of the service. Clearly people want financial guidance, but they have been conditioned not to expect to have to pay for it.
As I write, AIFA director Neil Liversidge and BBC journalist Paul Lewis are busy “exchanging” views on if and how consumers might be encouraged to pay for the financial guidance they need. By the time you read this column that little drama will doubtless have played out further, so I will resist commenting in detail.
That said I think it is worth comparing the financial advice world with that of the news media, where some portable digital devices have found a way of monetising the value of their content online. Virtually all mainstream newspapers and an increasing numbers of consumer publications now have some form of digital edition, which in an increasing number of cases are providing a much needed revenue stream, to compliment the advertising revenue which an increasing number of publishers were finding was not adequate on its own to maintain the resources they need to deliver quality consumer journalism.
A critical question appears to be what is the magic content that employees really want which will make them return to a workplace service again and again?
A number of other organisations are increasingly trying to galvanise social media as a way of building relationships, but again social media is seen as a free service. Whilst a number of the organisations mentioned above are rightly expecting to be paid extra for the added value content they are delivering in their workplace solutions, in practice Nest is effectively putting a price cap in place. To what extent will scheme members be prepared to pay for added value solutions? Of the many offerings now being promoted I cannot think of any where the cost of the additional service is being expressly defined to the customer, even if it is being achieved via a higher AMC for the scheme.
For the most part, with the notable exception of those advisers who have genuinely evolved their businesses to a true fee based model as opposed to just taking trail remuneration, the industry has resisted putting a value on advice charges. If those providing the service cannot bring themselves to make the cost clear to the end consumer, by which I mean the member not the employer, is it any wonder consumers do not perceive any value?
Just about every survey ever conducted into what consumers are prepared to pay for financial advice shows that if they are prepared to pay anything at all it is vastly less than advisers are used to or the advice costs to deliver using traditional methods. This must lead to a world where advice services need by definition to be delivered at a fraction of the traditional costs.
Increasingly I find myself with a clearer and clearer picture of the way in which service delivery can, and I believe must, be restructured in order to be able to trade profitably beyond 2012. Face to face communication for all but the extremely wealthy must become a thing of the past. Interactive relationships have the ability, if correctly executed, to deliver a high quality, scalable but at the same time affordable advice service. But if we are going to educate scheme members to new ways of working with us, it is arguable part of this exercise also be about being prepared to stand proud, demonstrate the value of advice and explicitly price for it.