Guidance vs advice – empowering employees with the right financial support at the right time.

The FCA and Government are seeking views as part of the joint Advice Guidance Boundary Review which focuses on proposals for closing the advice gap – the difficulty individuals face in recognising the need for accessing support in managing their finances.

The proposals in the policy paper reflect the government and FCA’s early thinking and so are very much open to change based on feedback and the outcome of discussions. But in the meantime, there are steps that employers and Trustees can take to empower individuals to proactively manage their finances.

Jonathan Watts-Lay, Director, WEALTH at work, comments;

“When it comes to helping people to get the right financial support at the right time, there are tried and tested methods with proven results – and it doesn’t have to be complicated. Many leading employers work with workplace specialists to deliver financial education and guidance programmes to help their employees achieve better financial outcomes, whether it is support with making investment decisions to build savings or accessing a pension for the first time.”

He explains; “Financial education seminars and webinars are useful in terms of helping employees gain a general understanding of their options, whilst one-to-one financial guidance via personal financial coaches allows people to clarify their own financial situation and gain a deeper level of knowledge around their options. More employers are now  switched on to the benefits of providing financial guidance in the workplace. In fact, our research with Reward & Employee Benefits Association recently found that 57% of employers are set to offer financial guidance services within the next two years. This is a recognition that employees need more support to help their decision-making throughout their working lives but may not always need full regulated advice.

Financial guidance is particularly beneficial for individuals at-retirement when faced with complex decisions around how to best access their pensions and retirement savings. Financial guidance can be a gateway to regulated advice for those who would benefit from it, as it can help them recognise all the complex things they need to understand about their finances. In doing so, they may then realise that they need specialist advice. Statistics from Pension Wise for example show more people go on to consult a financial professional than people who’d never used the service, which is also our experience of providing guidance to people. Afterall, it helps you realise why you might need advice and how to get it.”

Watts-Lay comments; “An increasing number of employers are now turning to specialist financial wellbeing and retirement service providers to bring all this support together. Taking an active approach and supporting employees with the help of reputable firms will make the whole process far more robust. However, before proceeding with a provider, carrying out due diligence is crucial. It is essential to check that providers of financial education and guidance are workplace specialists with experience in providing support to employees. Due diligence on advice firms should cover areas such as qualifications of advisers, the regulatory record of the firm, compliance process, pricing structure, and experience of working with employers. Ultimately, empowering employees by providing them with access to appropriate support at the right time can improve financial capability which should result in better outcomes for all.”

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