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A matter of trust

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Winning and maintaining the trust of employees is crucial to the success of corporate wrap, says Jenny Keefe

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Corporate wrap may give the life offices behind them a captive audience for financial services products, but employees will be resistant to a hard sell, warned delegates at last month’s Corporate Wrap Forum in London.

Delegates were unanimous that corporate wrap will suffer if employers feel their wrap provider is trying too hard to influence workers’ purchasing decisions.

But Jonathan Phillips, head of consultancy solutions at Bluefin, said that smart use of technology could help the financial services industry to win over employees. “Retailers’ websites are very good at it. Supermarkets use points to reward loyalty, and Amazon looks at the last items that their customers viewed,” said Phillips. “Technology knows an enormous amount about someone: what they earn, where they live, the funds they invest in and when they’re likely to retire. Advisers can use that information to communicate to employees the things that might affect them.”

Phillips’s view was shared by John Taylor, market director of corporate pensions at Scottish Widows, who said wraps could be used to gather marketing information in the same way as the Tesco Clubcard. “We know what employees buy and where their money is. Providers can even look at what scenarios the employees are considering, so if it’s clear they need help with what to do with their bonus, for example, the provider can direct them to receive financial advice,” he said.

But Roy Edie, senior consultant at Watson Wyatt, struck a cautious note, saying too aggressive an approach could alienate workers. “If employees feel the wrap is just opening the floodgates for their employer to send a load of marketing material, they are not going to be too inspired by that. They will get turned off.”

Jonathan Phillips

Jonathan Phillips

A poll of advisers found a majority thought that at least some employers would shun providers that promoted their own wares. Asked how concerned employers will be that corporate wrap offerings have been designed by providers to push their products to workers, 71 per cent said a small proportion will be worried enough to reject provider-run corporate wraps. The other 29 per cent said employers may have mild concerns, but it would not put them off the idea.

Challenged on whether wraps were intended to take employees to a buying position all the time, Taylor said: “At the outset, we did regard it as an opportunity to sell more products in the workplace. But instead, we took a leap of faith and looked at how we could help employees. There is such a great need among employees that very often it will result in a sale, but we don’t start from that proposition.”

Simon Fletcher, co-founder of Johnson Fleming shared Taylor’s view that the corporate wrap proposition is more about increasing the employee’s level of understanding of their own personal situation than pushing products.

Fletcher said: “It’s more than advice; it’s about communication, service and support. There doesn’t necessarily have to be advice. We can help employees to understand what opportunities are available. That may be through education through the wrap platform; it might be through other services provided by the employer, a consultant or an IFA.”

“Whether you are doing it online or offline, the most important thing is to communicate information that is relevant and use the technology to tailor information to the individual” Jonathan Phillips

Taylor said that a combination of online and offline communication works best. “If you’ve got someone out there making presentations, the employee can return to the website and play around with it. That’s got to be the most cost effective and compelling way of communicating effectively.”

Phillips said: “Whether you are doing it online or offline, the most important thing is to communicate information that is relevant and use the technology to tailor information to the individual.”

Delegates also flagged up issues the Retail Distribution Review, which aim to stamp out commission bias and come into force in 2013, could create for products other than pensions held within corporate wraps. Advisers were concerned that prompts from the wrap’s tools for employees to consider life insurance or income protection could have the effect of bringing these protection products into scope for the RDR.

Mark Futcher

Mark Futcher

This in turn could mean advisers having to up their game in terms of examinations, although delegates thought this would be necessary whether or not it was actually obligatory, if the corporate advice sector was to retain its reputation for professionalism. Hewitt Associates consultant Andy Cheseldine said: “Compliance-wise, we would describe wrap content as level three. But we will make sure that advisers authorised to level four do the work behind the wrap, so that we’ve got a safety net if we get into an argument with the regulator.” According to Phillips, corporate wrap will have a “hard job” ousting flexible benefits schemes and the day when this happens is “a long way off”. He said: “It depends what your flex platform does, but employers probably want the best-of-breed PMI, the best-of-breed PHI.”

Taylor said: “Given that most big employers are not greenfield sites, we’re very much expecting our product to sit alongside flex platforms. We will do customised integration between the two. Our corporate wrap will not replace or knock out flex.”

Asked if he expected providers to incorporate more benefits products in corporate wraps, Taylor said: “I think it’s easy for financial services products to cover protection. But I don’t ever see us doing bikes to work. So I think there will always be space for wrap and flex to co-exist.”

Delegates agreed that corporate wrap is likely to appeal to employers that already have flex schemes.

Phillips said: “Ultimately corporate wraps are about choice, and if you like choice, you’re more likely to be enamoured of them.”

Taylor reinforced this idea. But he added: “We’re also finding an appetite among smaller companies that only have corporate pensions, but don’t want to make a leap to full flex. This is a good halfway house for them.”

“It’s more than advice; it’s about communication, service and support. There doesn’t necessarily have to be advice. We can help employees to understand what opportunities are available. That may be through education through the wrap platform; it might be through other services provided by the employer, a consultant or an IFA” Mark Futcher

The delegates discussed exactly how corporate wrap should integrate with flexible benefits. Taylor said: “Some employers want corporate wrap to be the landing page, with a link to flex. Others want flex to remain the landing page and corporate wrap to be the link.” But Steve Herbert, head of benefits strategy at Origen, argued that employers should bring the wrap platform within the flex platform to avoid “a complete mess”.

Either way, advisers identified a potential for complexity where one provider is offering the flex package and another the corporate wrap.

Phillips said: “Ideally, we do want information on all the benefits to be in one place. But that presupposes that one of the providers will create a flex platform that will do the lot. Standard Life owns one, but it doesn’t have the other products to bolt onto it outside of Vebnet, which is a separate business.”

Advisers discussed which benefits employers could display in the wrap. Cheseldine said: “Credit unions might just be a flash in the pan driven by people hating banks, but employers do seem to be talking about them more.”

However, the panel was split on whether employers will want to put loans in corporate wraps. Taylor said: “We did some interesting research when we developed our project. We thought a loan facility would be valued, particularly with student loans. But when we researched employers, we found that while they took a paternalistic attitude to savings, they didn’t want to promote additional borrowing.”

But Herbert said: “If you go back to why employers want wrap accounts, they talk about recruitment and retention. If the employee owes money to the employer, the employee ain’t going anywhere. It locks in employees.”

Cheseldine said: “One of the things that our research has shown is that employees are reticent about signing up for a product where they think the employer can view their debt. They are less concerned about employers seeing savings.”

Barnett Waddingham associate Mark Futcher said it was crucial that there was a Chinese wall between employers and workers. He added: “I think the level of savings might be something employees want to keep to themselves as well, when it comes to arguing over pay rises.”

In a forum poll, advisers were unanimous that employees should be able to continue using the wrap after they stop working for the employer.

Damian Stancombe, head of corporate DC at Punter Southall, said: “The logic of this is the guy leaves the company, joins another company and they have a wrap platform. Can he actually access the old wrap platform after he leaves? That’s the big question, because people do not stay for more than four years with the same employer.”

Taylor said: “Certainly, our design is that the individual would have access to the platform after they left, so they can still do their financial planning, even if there isn’t an adviser there to work with them. Of course, if they do move to another corporate wrap, then, just like with corporate pensions at the moment, there’s a chance to consolidate with the new provider’s arrangements.”

In a poll conducted at the event, delegates were divided over whether employees would consolidate their existing investments on the wrap platform. The majority, 57 per cent, thought workers would in the next five years, but 14 per cent employees said employees would never consolidate their assets on a platform run by their employer.

Fletcher said: “It think that depends on the communication and the service that comes along with it. We focus on communication with the employee. Consequently, on the pensions side, we see a lot of individual transfers going into the group personal pension. I’d expect that to be exactly the same with corporate wrap.”

Taylor argued junior employees are more likely to put all their finances in the wrap. “I think that may well work lower down the workforce, because those at the top end have strong financial planning already, so they know what their assets look like. The wrap brings it down to others, making that planning more accessible,” he said.

Delegates also questioned how open providers would be to handing over their clients’ data to wrap providers. Taylor said: “Data-sharing has got to be an aspiration for the industry, because if we all do it, we can improve our service to consumers and there’s a bigger pie to be had. But in the meantime, we need to come up with standards and overcome the competitive tensions. I would like to get to that stage, but I’m not sure we’ve really got anything imminent.”

Cheseldine added it was vital that all the data was in a consistent format. He said: “The thing about corporate wraps is lots of them are in such a format that you simply can’t read the data. So information can be shared, but you can’t do it without spending a small fortune on reformatting the data.”

But there was resistance to data-sharing. Edie said: “As far as IT priorities go, data-sharing is way down the list.  Far more pressing are integrating with employers’ payroll and integrating with the flex provider.”

Taylor also added that providers would be protective of their own their data. He said: “There is that competitive tension, where you’ve got a new market, and every provider wants to come out with the best new product. They don’t want to homogenise it all so you can easily transfer the data.”

Data sharing should become the norm years down the line as technology advances. But until then, corporate wrap has to work out where it stands amidst whatever else is on offer, and must win the trust of employees if it is to make a lasting impact.

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