The “Buyers Guide to Financial Education”

5th July 2010

Jonathan Watts-Lay, director at provider WEALTH at work, puts financial education into three categories: managing risk for the employer and employee, employee engagement, and changing policy and regulation. “We have seen situations like the collapse of the bank HBOS, where a number of staff who were probably on quite modest salaries had quite a large proportion of their liquid wealth tied up in the company’s shares. Then the company went bust, and they lost all that money. The message there is: do not put all your eggs in one basket.” Financial education tends to be well executed when staff take up a financial benefit, but that is not always the case when the investment matures. “Companies are always telling people about joining their share schemes and such like, but it very much needs to be an ongoing process. It is no good doing it once and saying ‘we have done that’,” says Watts-Lay.

Employers can choose to undertake financial education in-house or employ the services of a third-party provider. If they want to provide staff with financial advice however, they need to ensure they comply with the law by only using a qualified independent financial adviser (IFA). Whatever route they choose, financial education can be delivered in a number of ways, including posting basic information on the organisation’s intranet or internet sites, benefits brochures, posters and flyers, group seminars, and workshops. More innovative employers could also use web or podcasts for staff to download and watch or listen to.  The type of education given will vary, depending on the type and size of the organisation involved, as well as the objectives it is hoping to achieve.

When employers opt to use an IFA, they must decide whether to go for an adviser that is remunerated on a fee or commission basis. Both routes have their pros and cons for the sponsoring organisation.

Angus Jones, managing director of provider Clarity, says: “The more you come back to fees, the more strategic your advice tends to be, whereas if you go by commission, you become product-focused.”

Please see  Employee Benefits for the full article.