In today’s economic landscape, financial services providers have the potential to act as an effective distribution channel for high quality products and services aimed at improving a consumer’s financial health. But Financial Wellbeing portals also provide that rare thing - a genuinely new proposition and the prospect of a “win win win” situation for all concerned.
Establishing trust is essential if employees are to engage successfully with online financial wellbeing services. Not only must employees be able to trust the advice given but must also be able to trust the Financial Wellbeing portal itself with their sensitive financial and personal information. Well documented cases of mis-selling and stories of other negative customer experiences with financial institutions travel fast across today’s social networks, acting as a cautionary tale to others. Honest feedback and reliable endorsements from individuals in analogous financial situations are therefore vital to building consumer confidence in online financial advice processes and their recommendations. However, given that many employees are currently struggling with their finances, the advantages of robust Financial Wellbeing programmes are clear.
Establishing engagement with employees is key and creates the opportunity to make the case for planning for long term financial security. In addition, aggregating financial data and providing a dashboard for employees to see their financial position at a glance, with reminders of when insurances are due to be renewed, for example, are both items which can have an immediate high impact.
However, being able to engage employees is not enough on its own. They will need support to make financial decisions and to act on any advice recommendations they receive. As a result, decision support is likely to become an increasingly important component of the process. An emerging area of research is the use of “conviction narratives”, which can help employees make decisions in circumstances where there are imponderables which can lead to “choking” and an inability to act. In essence, a conviction narrative is the melding of rational thought and a narrative of how future aims may be achieved by taking action. The narrative needs to be balanced and able to be reinforced by empirical evidence so that employees can trust their decisions. For example, when it comes to conviction narratives around retirement provision, so far, a lot of effort has gone into promoting the emotional side of a retirement conviction narrative with healthy silver-haired couples holding hands as they lean over the rail of a luxury Caribbean cruise ship or sip wine in a sun drenched Italian bodega. Little, however, has been done to address the rational reasons for investing for retirement. It will also be important to “hand-hold” employees throughout their investment and decumulation journeys so that they are not spooked by any falls in the market.
In the end, Financial Wellbeing portals will give employees access to unparalleled information, tools, guidance and a choice of advice at the level and price that they want. Advice will be cheaper via the workplace because of Government tax breaks and the efficiencies in the delivery of advice resulting from an integrated process with employees able to undertake much of the work involved themselves.
In recent years, employers’ attitudes towards providing financial advice in the workplace have been coloured by their largely high levels of risk aversion. Many are concerned that they might inadvertently stray into regulated advice if they promote investments or offer guidance. Financial Wellbeing portals, however, allow employers to be able to look after their employees’ financial welfare without having to take on responsibility for their security.
By offering a robust Financial Wellbeing portal, employers can help provide everything that an employee needs, literally at their fingertips with mobile technology and advice on hand at very affordable prices to assist in making better financial decisions. Employers should, therefore, benefit considerably from employee appreciation, a reduction in their stress, a decrease in absence from work, the creation of additional employer loyalty and, ultimately, an improvement in productivity.
Financial Service Providers
Promoting financial wellbeing is not only good for employers and their employees but is also beneficial to the financial services industry as a whole. Financial Wellbeing programmes enable financial services providers to access large numbers of employees in a potentially very efficient way. The support from employers in promoting the Financial Wellbeing portal and achieving “single sign on” with employers’ intranets is very important to achieving high levels of participation. A Financial Wellbeing portal, operating alongside a DC pension plan, is a valuable means of improving the slender margins on DC pension business.
Ultimately, financially aware employees will not only help drive new opportunities for financial services providers, such as debt management and rebroking of insurances, but can also offer long-term revenue streams as their financial priorities and needs change over time.
Although there are many hurdles to overcome, the workplace has the potential to become one of the most important channels for accessing advice and for the distribution of cost-effective financial products and services. It will be critical to keep the interests of employees to the fore but, uniquely, this opportunity offers enormous benefits to all concerned – employees, employers and financial services firms alike. We must, therefore, embrace this great opportunity and meet the inevitable challenges which resource constraints and regulation will present.
It may be an overused expression to talk of transformational change, but the workplace will be transformational for those employees, employers and financial services firms that help successfully maximise the potential of this exciting new distribution channel.