We have an industry embroiled with working on developing products, imp-roving the regulation surrounding products and reviewing the legislation within which our industry works. But are we missing the point?
Of course we need to get the infrastructure of our industry right and we have to welcome all moves to improve. Yes, reviews, consultation papers and Green Papers will all help our industry but this has been focused on the detail.
Whose eyes have not glazed over when reading page 100 and something of the latest consultation paper? Have we lost sight of the main aim – to improve consumer understanding and ultimately their financial situation?
What will make the single biggest difference to the future of our financial situation is improved education and communication.
If people do not understand something, they are likely to ignore it. If they have looked at something once and been confused by it, they are unlikely to come back and try it again. As an industry, this has hit us in the guise of what we like to call consumer apathy, which shifts the blame away from us on to the consumer.
The important point is that, as an industry, we need to take responsibility for the solution and the good news is that the tools already exist to make a difference.
We only succeed if we get education and communication right. The question is, how do we reach as many people as possible and make their finances mean something to them to inspire them to take action?
The latest ABI research shows that only 15 per cent of people trust the Government to keep their word and not let them down on their pension, whereas 54 per cent trust their employer to do the same.
We could wait until all new regulation is passed before we take action. Alternatively, we can maximise this as an opportunity and work with employers by taking education and communication into the workplace. The employer is already doing a lot to help. On average, employers add 10-30 per cent onto their payroll in terms of benefits.
Ask the person in the street what holds them back in improving their situation and they would probably say lack of cash. Tell them their employer gives them 10-30 per cent on top of their salary each month and they might take notice. Illustrate what this means to their specific situation and you have engaged them and this is the key. We need to engage people, we want to inspire action.
So, if employers are doing so much, what is going wrong? Well, in our employee benefits survey last year, we found that only 2 per cent of employers believe they are excellent at communicating their benefits, not least because of employer liability. The solution is to work with employers in this area.
The future success of our industry is about service, not about product. This may worry some. Service may sound a little intangible. Like professional or app-roachable, how is it measured? But within our industry, service is paramount and we need to demonstrate how it can be measured. How does this work in practice?
Within the workplace, we know that people have different needs and will respond to different types of communication. Some prefer something written, others something visual and others want to talk. These preferences will change as individual situations do.
Consequently, all forms of communication need to be available to all staff. This might mean a mix of total reward statements, access to an intranet site, access to a workshop or a one to one with an adviser.
The reason that this is successful is because it engages the employee. With improved communication, the employee has more appreciation of their benefits package and understands specifically what it means to them. This inspires action. For example, with improved appreciation, pension scheme membership take-up increases, as does pension contribution.
With such an approach, it is not untypical for membership to increase from 60 per cent to 95 per cent and employees making more than the minimum contribution increase from 15 per cent to 60 per cent.
How does this help the employer? There is a link between the communication of benefits and staff turnover. Our research shows that companies which offer an integrated approach to communication have 6.5 per cent lower staff turnover than the average company.
If communication was improved, UK business would save £2bn on the cost of staff turnover, that is, taking into account the cost of improving the communication. Real and measurable differences, which reduce the cost of turnover, improve retention and affect bottom-line profit. We all have a part to play and we can all make a difference – the Government, trade bodies, providers, financial advisers and employers.
Yes, there is regulation that will help. Indeed, if the Government introduced tax incentives to encourage employers to make access to financial advice available in the workplace, it would change the face of our industry. We have seen the difference that education and communication can make to an employer and to the employee. It is tangible and measurable and we have the tools available now.