‘Financial wellbeing’ has become something of a buzzword in the financial services industry in recent years, with many employee benefits providers now offering a range of tools and services in this area. VIEW THE ROUND TABLE SUPPLEMENT HERE
But while this is a term that is increasingly gaining traction, is it well understood by the people it is designed to help support? This was one of the questions raised at a recent Corporate Adviser/Standard Life round table event looking at how digital solutions can help move an individual’s money mindset.
Centrica’s director of pensions Ross Matthews raised this issue, in a debate with employee benefit consultants and providers.
“I don’t think financial wellbeing is a term that colleagues in the business and employees really understand. It’s a term that the industry has made up, rather than being something people will talk to their mates about down the pub. When we are talking about these issues, we need to use the same terms our employees will use when talking about money and debt issues.”
There was acknowledgement by those at the event that the phrase “financial wellbeing” may be problematic and could mean different things to different groups.
Defining financial wellbeing
Standard Life head of DC workplace new business Ross Willmott said the industry was often guilty of “over-complicating” things. He said it was important this did not become another example of this. “I think it is important we keep things simple and accessible and make sure the range of services offered are relevant for employees.”
Consultants at the event agreed that the phrase ‘financial wellbeing’ had become something of a catch-all term, encompassing financial education, budgeting help, financial coaching or advice, as well as products specifically aimed at reducing debts or boosting saving levels.
Hymans Robertson consultant James Smith said: “One of my colleagues has referred to it as ‘financial wellbeing greenwashing’.” He said there was the danger that some providers or employers might offer “financial wellbeing”, but this is little more than a tick-box exercise, where they do the bare minimum, rather than putting in place the tools or systems that make a difference when it comes to improving people’s financial lives.
Smith stressed the importance of looking at the contingent parts of what people mean when they talk about financial wellbeing. “Generally it is about ensuring people have a better understanding of their own finances. It’s about confidence when it comes to making money and savings decisions,
and it’s about resilience, making sure there is enough money in the bank so you are
not living from one pay day to the next.”
LCP head of financial wellbeing Heidi Allan said financial wellbeing can be a useful umbrella term, at least when talking to employers and providers. “But when we’re talking to individuals we generally talk about physical health, mental health and financial health. I think that’s better understood. It’s about education and empowerment, making people more confident when it comes to dealing with their finances.”
Many on the panel said that the biggest hurdle when it came to changing people’s money mindset was getting them to engage with financial issues, be it managing debt or saving for their retirement, with those whose finances are the most off track least likely to engage.
Engagement hurdle
Willmott said: “Part of the blocker may be that people don’t want the uncomfortable truth and to see the state their finances are in. There is a vulnerability aspect here that is important to acknowledge and support.”
Allan said exploring the parallels between financial and mental health could encourage greater engagement with
this issue.
Isio chief digital officer Vito Faircloth pointed to a wealth of statistics showing how poor mental health and poor
financial wellbeing were intrinsically linked, with money problems causing
stress and and anxiety, while those with existing mental health problems were more likely to find themselves facing financial difficulties.
Allan added that steps taken to encourage discussions with workers around mental health in the workplace may serve as a useful template to increase engagement around financial wellbeing, be it via designated mental health first-aiders or signposting to third-party organisations for support.
Money taboo
“There is often a ‘shame’ angle which makes people reluctant to talk about financial difficulties, particularly in the workplace.” Allan said this is particularly true of the growing number of people on higher incomes who are also struggling with debts and managing day-to-day finances. Research by LCP indicates two thirds of people have had to borrow to make ends meet over the last 12 months. But those in more senior positions at work, responsible for managing both budgets and/ or people, may find it difficult to talk about these issues, despite the fact problems are often due to external circumstances — be it relationship breakdown, a partner losing work, adult children returning home, or the rising costs of servicing debt — rather than intrinsically poor or reckless financial behaviour.
Gallagher consultant Francis Goss agreed that financial difficulties are still seen as a “taboo subject” by many people, who are reluctant to discuss these issues in a workplace setting.
As an employer, Matthews acknowledged that “enormous progress” had been made when it comes to mental health in the workplace. But he questioned whether people would feel comfortable today talking about financial problems with a colleague or employer. “So the idea of trying to normalise this, bringing someone into a safe space to discuss these issues, or signposting third-party help is a good idea,” he said.
Goss said emerging technology can also help address these issues. “At Gallagher’s we’ve developed a tool called Money Fit, which asks questions and then categorises people’s money ‘type’, into ostriches, owls or kangaroos.” He said that while this approach may seem frivolous, “adding an element of fun around these difficult areas can help reduce that sense of shame, or people sensing they are going to be ‘told off’ for not always making the most sensible money decision.”
Faircloth pointed out that tech-driven wellbeing tools can feel less ‘judgemental’ than a face-to-face discussion with an adviser.
This is only part of the engagement challenge though, he said. Many of the wellbeing tools targeting the workplace require individuals to input a whole raft of data, on income, outgoings, existing savings and investment plans as well as other factors. “It tends to be the more financially literate people who are prepared to put in this effort, as they want confirmation they are on the right track. The real problem is how you engage those at the lowest point. How do you bring them into this journey initially, even if it is just a quick check on their finances?”
Faircloth said that AI-driven financial coaching could revolutionise engagement, making this process simpler and also providing more relevance for those
using these services. He added he would like to see more employers offer AI-led financial coaching as part of their employee benefit packages.
Financial coaching, whether it is delivered by computer-based algorithms or individuals can be an effective way to start to change people’s money mindset, according to Secondsight employee benefits partner Nick Perry. In fact as many of the panel pointed out, tech was essential for this, given there were insufficient advisers in the UK.
“When we talk to individuals, in a professional capacity or just generally, we know they tend to bury their heads in the sand pretty quickly when you mention words like retirement. It’s a scary subject for a lot of people. Providers can only go so far in driving engagement. That’s where we need to find ways to look at wider financial education, and the workplace remains the ideal place to do this.”
Paternalistic employers may want to deliver financial wellbeing and education to help employees through a difficult economic climate. But delegates attending the event said this should also deliver good outcomes for the employer — in terms of productivity, lower absence levels and enabling staff to retire at a time of their choosing.
However, many said there needs to be more effective ways of measuring engagement with financial wellbeing tools and subsequent outcomes.
Evidence base
“Evidencing engagement and outcomes is not always straightforward at present,” said Isio head of DC pensions Richard Birkin. “Some people may be using these tools and having a good experience but we don’t necessarily know that, as they may not always need to take action, or may be taking action elsewhere – for example building additional savings outside the workplace which we will not know about.”
By way of example, he said people may review pensions holdings and decide to stay in the default, but they will not necessarily appear any different to those who are automatically in there but have little idea they even have a workplace pension.
Faircloth said that some employers can struggle to see the value of integrating financial wellbeing into their employee benefits. “They know there are tools and products out there in the market but at the moment a lot of employers don’t have those clear KPIs as to how they’re measuring the outcomes from the integration of these tools and products.”
Centrica solution
But Matthews said that Centrica has taken steps to both boost engagement and the measure potential outcomes of this engagement.
“We’ve worked with Standard Life to build a more engaging front to our bespoke My Pension hub, which covers both DB and DC pensions. Our DC pensions engagement is focused on five key things employees need to think about: how much they are contributing, are they getting the most from employer contributions, where the funds are invested, what happens if they die, and are they on track for retirement.
“We’re not asking people to change contribution levels, but to check what they are paying. We can measure if they are going into the system to look at these details, as well as who has taken action as a result of this.”
Matthews said that as well as driving more positive engagement on pensions, which can help improve boost longer-term financial security, this also provides valuable data for employers. “It has been an eye-opener to see who is engaging and who isn’t. Once we have these analytics we can segregate them and do more targeted campaigns to boost engagement among cohorts that may not be maximising contribution levels for example.”