Pension freedom has created a greater need for at retirement advice, but consumers also have pressing advice needs around reducing debt and protecting their families. Employers provide a pension, but can they play a role in advice too? What about other areas of financial planning, can employers be expected to take the load?
The Treasury published it’s findings to the Financial Advice Market Review (FAMR) this week. It identified the workplace as one solution to the access to advice barriers that people face, recommending that employers should play a more active role.
The review also identified that it’s not just about access. Demand for advice is low because people don’t understand the long term benefits – or cost – of advice. We have an engagement gap.
Auto-enrolment has meant the industry’s engagement focus has been to get people into the right investment option and contributing enough. It’s not been about the benefits of help at the right time.
Trust and effective segmentation
Although industry response to FAMR has generally been, ‘is that it?’ we should credit the review with recognising the consumer perspective. The Financial Services Consumer Panel (FSCP) response to FAMR pulled out the issues of trust and segmentation. Generally, people go to a trustworthy source rather than seek out a financial adviser. Employers feature as one of those sources; people who have been to an employer pension seminar have more confidence to shop around for their annuity. When it comes to segmentation, the FSCP calls for better research and understanding into segment advice needs within the context of broader life events, and attitudes. This is complex.
What’s the answer?
There’s no one solution to the engagement gap. Investment product providers may use analytics and technology to get the right information to their customers at the right time. But arguably this doesn’t solve the trust issue and consumers need help to understand any product bias.
Employers have the ability to help remove barriers to trust and segmentation. Employees generally trust their employer and after all, who has better knowledge of a particular cohort than an employer?
Auto-enrolment has increased costs and compliance burdens for employers, and they feel the effects of any tweak to pensions legislation. We can’t expect employers to be accountable for the engagement that helps people access the right advice at the right time. However, employers must be an influential conduit for education and advice.
Consider the vast sums spent by the Government promoting Pension Wise and auto-enrolment. These campaigns have targeted consumers using a broad brush approach. Assuming we buy into the notion that messages are better understood when they’re relevant and targeted, then perhaps Government sponsored help for employers to educate their employees is more sensible.
The key to successfully tackling poor engagement with advice? Blending analytics and technology with an employer’s personal access to employees. Responsibility lies with the financial service industry and the Government to help employers become that conduit in the most effective way.