Moderator: Innes Miller, Scydonia Wealth Markets Consulting
Expert: Keith Webb, Capgemini Consulting
Key themes
There is a growing opportunity to engage with individuals through the workplace.
There are a number of drivers behind this such as the introduction of auto-enrolment and the FAMR review which should make it more cost effective to serve individuals who currently may be unable to afford access to financial advice.
Few advice firms have to date been able to successfully deliver workplace advice propositions, although the ones that are structured to serve the corporate market are successful and make a profit.
Hargreaves Lansdown was mentioned as an example, where they are working with BT to provide financial advice and pensions planning through the workplace. More broadly, corporates recognise the importance of being able to support employees with financial advice at all stages in their careers, and in particular at-retirement.
Corporates are less willing to engage with the EBCs due to mistrust and cost. This change in sentiment is creating new opportunities for advice firms. The challenge for advice firms in developing and launching such propositions relates primarily to access to talent and creating the infrastructure required to cost effectively serve individuals in the workplace who may not be in a position to pay current market rates for access to financial advice.
The mass market, mass affluent and potentially some elements of the affluent market will find that choice and access to advice in the retail market will reduce. In line with this, they may be more willing to turn to the workplace for advice and support on personal finance matters. Given the level of government interest in this, over time we may see greater innovation and choice emerging through the workplace.
Auto-enrolment provides a greater opportunity to engage individuals in the workplace but it is not without its challenges. There are structural issues. For example it may be cheaper for the employer not to include auto-enrolment as part of an overall employee benefits package (but rather to keep them distinct), employees may not see the value in opting in and the overall speed of take up has been slow. For these reasons, we may see the government introducing more measures to encourage greater take up.
In addition to engaging with the employer, advice firms could also consider how they work with unions to drive awareness and engagement in the workplace. This could also include when people are being made redundant and the access to financial advice they require at this point.
The introduction of vouchers that individuals can put towards accessing financial advice is also an option. Although there is a question around how these could be delivered cost effectively given the tax implications for the employer and employee.
The introduction of the Lifetime ISA and Help to Buy ISA provide the opportunity to offer a different type of advice. The Lifetime ISA provides greater flexibility and places more responsibility and choice with the individual. While it may be simpler and can be bought without advice, it may require greater ongoing engagement and involvement from the employee than is currently the case with pensions due to the flexibility afforded. This could create new opportunities for advisers.
Other new developments in the workplace include the rise of wearables. This will help to address issues such as absenteeism through illness and allow insurers to provide personalised price points for protection products. Employees will also have the chance to participate in office fitness competitions which can improve engagement and health and wellbeing.
However, for firms to take advantage of the workplace opportunity they will have to develop and sell a specific workplace proposition. New skills and capabilities will be required at a time when the workplace opportunity for advice is growing and is likely to be further encouraged by changes to government policy. In addition to educating employees, advisers will also need to think about how they can educate employers on the benefits of workplace advice to achieve full buy-in and commitment.
Conclusions
- The opportunity to engage with consumers will grow through the workplace, helped by the growth of auto-enrolment, the introduction of new products such as the lifetime ISA and further enhancements to government policy.
- Advisers can capitalise further on opportunity, but will have to create specific services and propositions to meet these emerging needs.
- Employees in the workplace should not be considered as one group, but rather as a market that needs to be segmented in line with the profile of employees, where segment-specific propositions are on offer.
- Technology will play an increasingly important role in workplace advice and benefits through the use of for example, wearables and the growth and development of digital advice.
- Technology should also be used to address price sensitivities in workplace advice through the creation of low cost products and services that will be profitable in low margin high volume environments.
