Since the EU Referendum vote, our economy has entered unprecedented territory. The long term effects of that decision will not be known for some years. One thing is certain however. There will be change and lots of it. Benefex have long waxed lyrical about the impact employee financial wellbeing has on increased engagement, productivity, and a reduction in absenteeism, and Nudge’s financial education tools have supported this. Helping employees with their financial worries, and how to avoid them, is not only the right thing to do, but it makes clear business sense. In September, I made my way to the (awesome) Benefex office for a webinar on how you can support your employees with financial education.
What’s driving uptake of financial education tools?
- Legislative change. The referendum has been a significant driver; there is going to be a huge amount of change over the next couple of years, and a lot of companies want to help their employees navigate through that changing landscape. In addition, pensions legislation is also a key driver; the government are moving the goalposts every year, and organisations want to ensure that their employees understand where these goalposts are and what decisions they need to make.
- Wellbeing. In the US – where financial wellbeing is already a defacto offer to employees, the evidence is well documented and evidenced – 1/3 of healthcare claims and absences are due to stress, of which the biggest contributor is financial stress. By tackling the issue we can reduce healthcare claims and absence.
- Engagement. Whether your people are buying a house, having a child, getting married, coming out of Uni with debt; dealing with elder care, divorceor bereavement – helping them navigate through their particular situation provides a great opportunity to drive engagement by showing that you really care.
- Culture. For organisations with a strong corporate social responsibility agenda, financial education is just the right thing to do.
- Managing Risk. Financial education is a key mechanism in workforce planning and making sure people are able to retire when they and you expect to.
What’s in store for financial education in the next few years?
What we’re seeing is – typically with benefit trends – the UK trails the US by about five years. In the US, over 80% of companies with over 1000 employees are offering financial education as part of their programme. The market in the UK is catching up fast.In 2014, 46% of Reward people hadn’t even considered financial education for their people In 2016, that number has dropped to 4%. This is becoming a de facto offer for companies who care about their people.
The major trend is around personalisation. Organisations have an amazing opportunity to really help their people. Our research proves that the more you personalise the experience of the individual, the more likely they are to take action and therefore create better outcomes. Companies already hold a lot of data about their employees, and by utilising that data set, we’re able to create an incredibly personalised journey for these people.
Financial Advice at work
There is a place for regulated financial advice. Reward leaders, however, tend to want to steer more towards financial education and guidance. Individuals may then wish to pursue independent financial advice after this, so this could sit outside of the workplace. ‘Information only’ is not good enough, but regulated advice might be a step too far, so the sweet spot seems to be in the education and guidance bracket.
How Financial Education can measurably help employees
Tracking a change in someone’s circumstances, and monitoring changes in legislation which might affect an individual, will drive in-the-moment, personalised nudges to them. E.g. in July, news came out that significant numbers of people who had taken part in ‘Help to Buy’ were unable to achieve the government contribution towards this scheme as they had not read the small print and followed the process properly. So, we’re able to target those people for whom Help to Buy would be important, and ensure that they are fully educated on all aspects in order to take full advantage of this type of scheme. Another example are the pension changes made this April affecting allowances. Because we hold the data on earnings and funds, we are able to target the right group with the right personalised education.
So, who are Nudge?
We’re a pure financial education provider, and we hook in with RewardHub to create a seamless experience for the user.
Our three key messages:
- We’re independent. The money that we make is a per-employee, per annum license fee.
- This isn’t “another system” to get to grips with. This is fully integrated with RewardHub, so your people will get a seamless experience, and admin-wise, there’s practically zero work to do.
- It’s completely inclusive. Regardless of income, everyone deserves to get high quality financial education.
How to get business buy-in:
We’re finding that a lot of CEOs are making financial education their pet project. We constantly monitor a significant amount of ROI data – e.g. increase in pension contributions which leads to an increase in Salary Sacrifice savings. In the seminal work on financial education by the CIPD’s Charles Cotton, it is documented that the consensus view on ROI is 6 to 1, which is broadly split between employer and employee.
Implementing financial education tools with maximum success
Two main points:
- The more senior the person within the organisation who launches this, the more successful it will be.
- You need to have a hook as to why you’re doing this. This could be that your flex window and you want to help your people make better benefit choices. It might be your AE staging date anniversary and you want to ensure employees understand whether they are contributing enough or invested in the right fund It might be your annual results are published which focus on corporate social responsibility output, etc. When the scheme lands, it’ll be clear to everyone in your organisation as to why you’re doing this; its value will be palpable.
Financial education works perfectly alongside flex. How can people make benefits selections without a context of what’s going on in their life? So, for example, if you’re moving home and you want flexible life insurance, what better opportunity to buy that insurance through your employer rather than the mortgage provider? It’s about making sure you’re linking people’s home lives to their work lives to achieve maximum value for them personally.
How to engage younger and/or less well-paid staff
The traditional approach to financial education has been almost exclusively pension-focused. Pensions are, of course, incredibly important, however they’re not going to achieve significant engagement with younger members of your team. What you can do is get them engaged with what’s important to them. For example, younger people on lower wages might be struggling to save up for a holiday, so if you can encourage practices like saving for a trip to Ibiza, then they’re teaching themselves the skill of saving, which creates good habits throughout their careers.
The evidence is clear that if you tell people what to do, then not only do they not do it, they actively rebel against it. However, if you leave people completely to their own devices, they do nothing. Nudge theory is all about how you position information in order to help people make their own better decisions. It’s about using data about people in order to frame the direction you want them to take, and this'll help them make better decisions.
Listen to the full webinar here.
Sounds good! Need a bit more information? Give Benefex a call on 0844 963 0023 or drop an email to firstname.lastname@example.org
Jeremy is Co-Founder and Director of Nudge Global.
Nudge are a specialist provider of Financial Education, and thrive on the belief that the future of Compensation and Benefits is promoting reward and benefits in the context of an employee's life journey; Financial Education provides the glue to do this.
Find out more at nudge-global.com