The challenges of employee access to financial advice.
Andrew Firth, CEO of Wealth Wizards
The introduction of auto-enrollment and ‘pension freedom’ reforms have meant that pensions and retirement choices have never been wider for employees – something that is undoubtedly to be applauded. However, for HR, these pension changes and the implications for employees presents one of the biggest challenges to date The increased choice and flexibility means that people need more help than ever, and there is a real risk that some do not engage at all because of the complexity and jargon that comes with pensions.
Quality advice is the number one agenda item that the government and Financial Conduct Authority (FCA) will be debating this week as they seek to drive consumer engagement in the pension reforms. It’s a landmark meeting that acknowledges the role that professional advice plays in ensuring a successful outcome for employees and employers alike.
It’s no surprise that employees want – and need – good quality pension and retirement advice but currently there is no legal entitlement for employers to make it available. So whilst an employer may opt to provide pension advice to their employees as part of its policy, it will be up to the employer – or employee – to pay for the advice given. Despite their best intentions to help, many employers struggle to find affordable expert advice that can be made available consistently, for all employees.
This creates something of a vicious cycle; employers that don’t make pension advice available can be missing a critical opportunity to engage their employees. In turn, employees will be less likely to take advantage of the pension benefits on offer to them. It’s a lose-lose situation for everyone involved.
Understandably, many employees look to their employer to provide help with their workplace pension. This represents a fantastic platform for organisations to build employee trust and engagement because, by providing access to qualified and informed advice, employers can demonstrate a level of commitment and concern for their employees that far exceeds the minimum requirement of auto-enrollment.
Filling the ‘advice gap’ will inevitably fall to HR and this places a huge responsibility on organisations, especially smaller businesses where there may not even be a dedicated HR department. Even in larger businesses there often isn’t the in-house capacity or capability to provide employees with access to much beyond basic help and information with pensions.
So what’s the answer when the desire to help and educate employees is strong but the practicalities of doing so are less so? This is where bespoke, on-line pension advice – sometimes referred to as robo-advice – can help. For a start, the service is much more affordable because the advice is drawn from sophisticated software that generates a personal profile of the individual. Secondly, the advice liability lies in the hands of a fully-regulated third party. Thirdly, the advice can be deployed inclusively to all employees with access to the internet at their convenience
This isn’t just cost-effective, it offers employees peace of mind because they know the advice they have received is personal to them – no-one wants generic advice! This is one of the biggest concerns about the government’s proposal’s to provide free and impartial pension advice. At the end of the day, the advice isn’t regulated, it isn’t delivered by professional financial advisors and it doesn’t drill down to specific providers or people’s unique circumstances.
The term ‘robo-advice’ can be misleading as it implies an automated process where ‘real people’ are replaced with technology. At Wealth Wizards – that simply isn’t the case. Behind our innovative software is a team of dedicated people who are always available to help use our apps, discuss the results and make sure employees understand the recommendations. Employees can speak to a dedicated customer services team and, if needed, they are referred to a Chartered Financial Planner to review. It’s a combination of leading edge technology and real people; the best of both worlds.
Employees entrust us with advising them on the most precious thing of all, their future, and our mission is to help them make that future a reality. That’s why I welcome the move the FCA has made to ensure quality advice is prioritised for all consumers. It’s the crucial foundation for a better financial future and one we must all seek to deliver.
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