Wellbeing’ has moved from being a buzzword to a key issue in the employee benefits industry following the Covid-19 pandemic.
But to date, much of the focus has been on employees’ physical health and mental wellbeing. At a Corporate Adviser roundtable discussion last month providers, consultants and consumer representatives from across the industry discussed whether there has been sufficient focus on financial wellbeing, given the corrosive effect that problem debts, stretched finances and poor budgeting skills can have on an employee’s emotional and mental health.
Delegates attending the roundtable were broadly in agreement that financial wellbeing has been the ‘poorer relation’ in these wider wellbeing discussions, although some where hopeful that this situation was starting to change.
Future Financial Services director Paul Shanahan said at the moment financial wellbeing was a low priority for many businesses. “In my experience it is pretty non-existent. I think there has been more of a focus on mental health and physical wellbeing but I haven’t seen the same attention to financial wellbeing.”
He said many firms, particularly smaller businesses, have only just got to grips with the auto-enrolment workplace pension and are hoping this is all they need to do to support employees’ finances.
“The huge majority of employers don’t even know what an income protection plan is. The might have a cash plan or a medical plan but that’s it. I think this picture may be different for larger employers, but this is the reality for many smaller businesses.”
However Lane, Clark & Peacock senior consultant Heidi Allan said she has recently seen far more interest from employers about financial wellbeing. But she admits there is still a lot of progress needed in
this area.
“I don’t think we are anywhere close to where we need to be when it comes
to financial wellbeing. But what is encouraging is the number of organisations we are talking to that now have this on their agenda.”
Allan said that the pandemic has pushed the issue of financial wellbeing up the corporate agenda. Employers have become aware of the strain that the pandemic has placed on many people’s finances. Even if the firm has kept an employee on, their household income could be reduced if a spouse has lost their job or been forced onto reduced hours or furlough pay.
But Allan said that being aware of the problem doesn’t always translate into workable solutions. “I think one of the biggest challenges we’ve got is that organisations just don’t know what to do.”
Shanahan said that part of the problem is that the senior decision makers don’t necessarily have the knowledge or skills to know how to improve the financial wellbeing of employees. “They don’t really know how to tackle the problem and they don’t always have access to potential solutions.”
Allan agreed that the industry needs to do more to promote effective solutions. “I think one of the biggest challenges we’ve got is that organisations just don’t know what to do. There’s lot of hungry fintechs out there offering products and solutions, but many are only looking at one element of financial wellbeing.
“I think a lot of organisations I speak to on a daily basis are just really confused by what to do.” This issue is not helped, she said, by the fact that many businesses are finding their own finances stretched and those in decision-making roles don’t always have the financial knowledge or skills themselves to see what is needed.
“Many businesses are struggling to find the budget and the bandwidth to be able to address this issue properly,” she said.
Those attending this debate agreed that one key way to address financial wellbeing was better access to advice and education to help employees better manage their finances.
Keith Richards, former chief executive of the Personal Finance Society and now chairman of the Financial Vulnerability Taskforce, pointed out that there remains a significant ‘advice gap’ in the UK, which is contributing to this problem.
He said significant progress is only likely to occur if there is a joined-up “tripartite approach”, involving
government, regulators and the financial services industry, to try to bridge this advice gap.
He pointed out that regulation may have previously inhibited innovation in the advice area and restricted access to advice by pushing up costs. But he said regulators are now acknowledging this issue and have become more focused on widening access to advice. The Financial Advice Market Review (FAMR) was an important starting point for addressing this issue, he said.
It isn’t just access to advice that needs to be widened. Many on the panel saw a need for this advice to cover a broader range of issues if it is to improve financial wellbeing in the workplace and deliver tangible benefits.
At present regulated advice tends to focus on issues of retirement and investment. But as Richards pointed out, people in the workplace also need advice and guidance on budgeting, debt and credit.
Richards said: “There has been a significant cultural change in people’s attitudes to money in recent years. People will borrow money to pay for holidays, for example, whereas a generation ago they may have saved for them.”
Panoramic Wealth Management managing director Gary Jeffries pointed out the shortcomings of guidance compared to financial advice. “I can use Gordon Ramsey’s recipe book to cook a meal, but when I take it out of the oven, it’s not going to taste like it would if Gordon cooked it. In the same way, if someone has a go at sorting out their finances based on some literature they’ve been given, chances are they will make a mess of it.”
Failing to make a decision, or making the wrong decision, can have significant adverse consequences on an individual’s financial wellbeing, he said.
Fairer Finance founder and managing director James Daley agreed that if regulators, policy makers and employers want to improve financial wellbeing there needs to be more of a focus on problem debt and easy access to credit.
“Credit has got easier and quicker to get your hands on.” But this isn’t just a ‘spending’ issue he said. There is also the issue of employees becoming more financially resilient. “Employers can help here with access to protection policies, such as life insurance, or income protection. This can offer a financial safety net, which in some cases will help stop people falling back on high-cost short terms credit if their circumstances change.”
Improving the financial wellbeing of employees means taking a holistic approach that looks at protection, retirement saving, advice and education on day-to-day money management. Although Daley points out, that as the owner of a small businesses himself, there are significant hurdles that prevent many organisations doing this.
“An income protection plan isn’t necessarily valued by staff, particularly younger staff, and so it isn’t necessarily helping with either recruitment or retention. It may be unrealistic to expect many small businesses to be providing these benefits when budgets are stretched. Wellbeing benefits, such as access to mental health support are far more valued, so employers may prefer to spend what budget they have on these benefits.
“This is why I think the solution has to be driven by government, via the workplace.
If we can increase the number of people with income protection benefits, whether it’s via tax breaks or auto enrolment then we can develop a much more financially resilient society where fewer people are forced to fall back on expensive credit options.”
Richards pointed out that the Financial Vulnerability Taskforce is an body that has been set up to improve the financial advice and options given to those who find themselves in difficult circumstances.
It now has around a thousand regulated advice firms signed up to its charter. Firms that have signed up commit to the nine principles (see p9) on dealing with clients in more vulnerable circumstances.
He said: “We focus on vulnerable circumstances rather than vulnerable people as no-one likes to be stigmatised as a vulnerable client. And I also think people get confused with thinking that vulnerability is about people with physical disabilities or age-related impairments.
“We have known that certain life triggers create the need for, and opportunity for, professional financial advice. But equally these events can also leave people in more vulnerable circumstances at least on a temporary basis.”
Those on the panel agreed that access to financial advice can help support employee financial wellbeing. But significant hurdles still remained to providing this as a benefit within the workplace.
Those on the panel agreed that the workplace remained an optimum environment for delivering financial education and advice. However, for these hurdles to be overcome they stressed the importance of having an overarching regulatory framework support, promoted by policy makers in government.
Richards pointed out that education
is only half the issue. He pointed to the good work done by the Money & Pensions Service. “They do a great job in empowering people with more information. But the problem remains that they don’t know how to implement or act on this information.
“What we tend to see in the statistics is lots of people saying they have benefited from talking to someone about their finances, but then were left on their own and didn’t know where to go.”
WorkLife by OpenMoney relationship director Paul Chedzey said that technology-driven solutions, like
employee benefits platforms offered by their firm, can help address some of these issues, bringing costs down for employers, widening access to financial advice and crucially providing help with implementation.
He said part of the challenge is to ensure that financial wellbeing becomes a more central part of the wellbeing discussion. “This isn’t just about doing the right thing for employers. It is getting the message across that this can benefit business clients too.
“Employers will benefit from their employee having a sound knowledge of their day-to-day finances, and take some comfort from the fact that they are not in debt, or not in too much debt or are restructuring their debt, in a way that makes their finances stronger and gives them more choices for the future.”
