New research from Close Brothers’ Workplace Financial Wellbeing Service, reveals that at a time when money worries have increased for many employees, the offer of financial advice is still way down the priority list for many companies, due to a perceived risk of inappropriate advice being given to employees.
The data reveals that one in three (34%) UK organisations do not offer financial advice. This increases to 1 in 2 (51%) organisations with fewer than 500 employees. Nearly half of these organisations have no intention of introducing financial advice as a benefit in the near future. When asked why, the most common reason is the perceived risk of inappropriate advice being given and it reflecting badly on the organisation itself (27%), or the risk of selecting an unsuitable advice firm (21%). The other reason is because financial advice is not deemed to be an important workplace benefit (23%). When asked what would make them consider offering financial advice as a benefit, a third of employers said they would need evidence that employees would take it up, along with requests from individual employees (21%).
And yet, Close Brothers’ Workplace Financial Wellbeing Service’s research2 also revealed that in a time of squeezed finances, the biggest financial challenges faced by employees are managing normal living costs, and the cost of rent/mortgages. With this in mind, when considering the workplace benefits that would most positively impact their financial wellbeing, financial advice came third on the list of priorities for employees (36%), after pension (52%) and private medical cover (38%). And this priority was in every all employee age category, with particular relevance given by those aged 25 to 34, with 42% of employees ranking this as vital.
Not only does the research show that too many companies in this country do not offer financial advice despite a clear need for it, but it also reveals that amongst the few that do offer advice, its impact, range and reach is stymied. Pensions and retirement advice is the most common type of advice offered at 48% and 44% respectively. Within this, 17% of organisations offer advice only to certain groups of employees, whilst 11% provide advice for retirees specifically. Just 12% of firms offer the full range of financial advice for all their employees.
Jeanette Makings, Head of Workplace Financial Wellbeing at Close Brothers Asset Management comments:
“Despite a clear call for financial advice in the workplace, it is evident employers that do offer it are not recognising all employees would benefit from this for all areas of personal finance; the need isn’t limited only to pensions or at retirement. And for those that are still shying away from offering it as a benefit, the risk of individuals finding a suitable adviser on their own, with consistent quality, service and price is far greater than the perceived risk of a workplace selected adviser providing inappropriate advice and possible repercussions on the organisation. There are over 16,0003 financial advisers and advice firms in the UK, of which 82% have fewer than three advisers. When trying to navigate such a complex market on their own, employees are vulnerable to considerable variation in quality, price and service. Having a firm that has been selected by their employer, and where quality, price, service standards and credentials have been reviewed and are monitored, is far preferable.
When it comes to choosing a provider, note that some may not be able to provide the full range of advice services. So, employers need to understand the range of advice and any limitations of expertise from possible providers. Furthermore, where possible, employers should try not to limit advice to only one area of personal finance, or a segment of employees as this will reduce its reach and impact.”