Is there a cost-effective way of delivering financial advice to a mass market via the workplace by harnessing corporate employee benefit solutions?
This was one of the topics discussed at a recent Corporate Adviser roundtable. Paul Chedzey relationship director at WorkLife by OpenMoney said: “The question of how to get financial advice to the masses has been debated for years and I don’t think anyone has solved this problem yet.”
The consultants and providers attending the roundtable event agreed there was a potential for far more to be done via the workplace, but pointed out that a number of hurdles remained.
One of main ones is cost. Providing face-to-face financial advice with individual recommendations has always been a costly process, and these costs have been driven up in recent years by increased regulation. On the face of it these regulations help protect the consumer, and ensure there is a route to redress should the advice prove unsuitable. But one of the unintended consequences of this has been to drive up the cost of financial advice.
WorkLife by OpenMoney director Steve Bee said: “The business models of most financial advisers don’t fit with the vast majority of people.” As he pointed out, most independent financial advice is geared towards older and wealthier individuals.
“People are seeking financial advice on how best to invest a portfolio worth hundreds of thousands of pounds.” This, he said is a world away from the day-to-day help that most people need when it comes to managing money.
“For the vast majority of people coming to our OpenMoney app, which is the one offered through our workplace benefits platform, the advice they are receiving is to start reducing their debt.”
However, there was optimism from those attending the roundtable event that new AI-driven technology solutions should drive down costs of advice, making this a more viable workplace employee benefit.
Futura Financial Services director Paul Shanahan said these robo-advisers could help widen access to financial advice. “If employers are serious about improving the overall wellbeing of their employees they will understand the importance of tackling financial wellbeing as part of this approach.
“I think the way to address financial wellbeing in the workplace will be via AI and robo-advice solutions. This has the potential to work well if the right solutions are in place and should particularly engage younger employees.”
Shanahan said he would be keen to see tools made available to employees that enable them to view their finances remotely and discuss options with friends and family. “I think this is vital and has the potential to really change some of the conversations around money and financial wellbeing.”
As well as being a cost effective solution for employers, AI-driven advice and guidance options have the potential to deliver tangible results for a broad spread of employees. As James Daley, founder and managing director of Fairer Finance pointed out, employee benefits such as critical illness insurance will be a huge benefit for the minority of people who go on to claim these policies, but for the majority of the workforce this will remain a safety net that thankfully they will never need to use.
In contrast, the vast majority of employees, of different ages and income brackets, could benefit from access to tools, advice or guidance that help them manage their money better. This could also deliver benefits to the employer, by potentially reducing causes of stress and anxietyamong their workforce.
Historically there may have been some pushback from consultants about recommending financial advice as an employee benefit. Some firms have offered advisory services as an additional benefit and there has been some resistance from the advisory community to direct ‘robo-advice’ services.
However many attending the event said these attitudes were starting to change.
Keith Richards, former chief executive of the Personal Finance Society and now chairman of the Financial Vulnerability Taskforce, said: “We are definitely seeing professionals from across the financial advice sector embrace the potential that technology offers to enable them to increase access to their services.
“The vast majority of principals in firms that I’ve spoken to are absolutely open-minded when it comes to utilising technology, not only to enhance their current service for existing clients, but to find a way to increase access to their services per se.”
But he said engagement remains a challenge. “Some of the tools out there are fantastic but one of the biggest challenges is getting people to use and engage with these services. It isn’t a case of build it and they will come.”
Panoramic Wealth Management managing director Gary Jeffries said that more and more people are having to make their own financial decisions, be it about retirement, or budgeting, but there is often a reluctance to engage with these services.
“One wrong decision can have severe consequences. There is a real need for help on these issues. If people have a decent car they will have it serviced once or twice a year to ensure it works perfectly. If everyone was doing their own stuff we’d see cars conked out on the hard shoulder up and down the motorway.
“We don’t see the result of this with finances or pension funds, because when they go wrong people don’t admit it. But we need to perhaps adopt a similar approach of getting a money MOT to check everything is running as smoothly as it can be.”
Richard points out though that there are now a lot of hybrid models emerging in the wake of the Covid-pandemic which has seen a rapid enforced switch to more digital-based products and services.
From a consultancy point of view Lane, Clark & Peacock senior consultant Heidi Allan said there may be some resistance to bringing in regulated financial advice, from consultants, and from employers.
She said some consultants might be concerned this could conflict with the education and guidance propositions they are providing.
“There may be some resistance. But I think there is also real resistance from a lot of organisations who are really worried about recommending an independent adviser or wealth manager and then not knowing what products or services they may be offering.
“I also think a lot of organisations struggle to understand where the line is drawn between what is information, what is guidance, what is coaching and what is advice.”
Chedzey added: “I think there is a lot of education that is needed around this. Giving your staff benefits like a free coffee or gym membership is risk free. But there is the perception this may not be so. Part of the challenge is to get employers to understand there is a real need for this service that will benefit not only their employees but the business too.”
Allan said that this problem can be magnified by the fact that there are few organisations or technology-solutions that can support everything an organisation needs.
“For example we’ve come across a couple of fintechs that are starting to do interesting things on financial coaching. But they are either touching the retirement aspect or looking at mid-career help. We’re really struggling to find organisations who can work with our clients to provide the whole remit.
“And what we’re also seeing, which I think is a big issue and a real challenge, is providers who embed services from other providers. So for example you might go to L&G for a workplace pension but it is another organisation that is providing the education resources around that, be it guidance or potentially access to advice. And there may be another provider offering workplace loans, which some employers may not be comfortable with.
“I think it comes back to legislation and regulation, making sure there is clarity around these different services and a transparency for the client so they know what they are signing up for.”
When it comes to new AI-driven technology Daley said he has yet to see “radical transformation” when it comes to financial services products.
“If you look at the credit card market for example, you see lenders like Lloyds starting to use this technology to assess a potential customer’s circumstances and push them to the products that are more likely to meet their needs.” But he said this has limited applications at present. “I think it is generally stopping short of saying the customer should be reducing debt, not taking out another credit card. There are eligibility checkers, but we don’t see the kind of detailed questions that get under the skin of an individual’s personal circumstances.”
In the same way that employers are wary about offering ‘advice’ to employees, he said many providers, be they banks or price comparison sites, share similar concerns. “There’s still this fear that the regulators are waiting to pounce on them for stepping over the line between guidance and advice. But it does feel that they are starting to change their outlook now, and the regulatory direction of travel seems to be moving towards challenging firms to better understand their customers’ needs and ensuring they have the right products that are delivering the right outcomes.
“We are pretty early on in this journey but this gives scope for development of many of these tech-based solutions.”
Chedzey said that he hopes that employee benefit platforms like those offered by WorkLife can be part of this solution, by enabling access to a range of cost-effective benefits including financial advice. “It won’t solve all the problems but we hope this is a start to addressing the issue of financial wellbeing in the workplace.
“I agree with there needs to be a three-pronged approach but I can’t see the government making much headway on this at the moment, so I think the onus is on the industry and employers to deliver better tools and services that are meeting the real needs of their employees.”
He added: “I think there is a real opportunity to provide better financial education tools within the workplace. It still slightly amazes me that when someone joins a company they have to do various tasks to do with online training or GDPR responsibilities. But we don’t do anything for people to help them with financial basics, such as ensuring they understand how to read their payslip or how income tax works. This could help highlight those who are more financially vulnerable and point them towards appropriate help and services.”
