Can employers help plug any advice gap? According to the Financial Advice Market Review (FAMR), a number of stakeholders said the workplace had an important role to play in supporting good financial decision-making among employees.
It suggested employers should play a bigger role in helping their employees to access financial advice and guidance. The question is, though, does a stress test of the recommendations make them seem realistic?
If one looks at the statistics there is serious cause for doubt. Around 95 per cent of UK businesses are micro firms with nine or fewer employees. In total such micro employers account for 33 per cent of employees in the UK.
Small firms, those with between 10 and 49 employees, account for a further 15 per cent of employees. So, almost half of employees work for small enterprises. How likely is it that such employers will voluntarily take on a role helping employees with their finances?
The one reference point we have is auto-enrolment where employers have no option but to comply with the law.
It is early days yet but The Pensions Regulator is putting a brave face on progress, reporting so far 90 per cent of small firms have complied with their obligations but this is against a background of a sharp rise in enforcement notices and fines.
The Federation of Small Businesses reported in January this year: “Nearly half of business owners without a workplace pension scheme (45 per cent) are still unclear about their responsibilities with a quarter (25 per cent) not confident their business can cope.”
It hardly inspires confidence in small employers taking on voluntarily a financial education role.
When it comes to large employers is there more prospect of them helping their employees? The employee benefit advisers SecondSight carried out a survey among 250 firms with 100+ employees.
In this report, Is There a Need For Financial Education in the Workplace?, published in 2014, only 38 per cent of the large firms surveyed provided any financial education to their employees.
The report comments to being “a little bit sceptical about these results because some firms will say they offer financial education when, in reality, they may just have a leaflet outlining the company’s benefits and pension scheme”.
Even where the employer does do more for its employees it is likely to be related to pensions rather than to more general financial matters – debt, savings, insurance or investments.
As to the causes for larger employers not doing more, many simply do not feel it is their responsibility as well as being worried about cost and liability.
Banks, as providers of business banking services, have an established relationship with some employers and can cherry pick those to whom it looks profitable to offer help with financial education.
If that assistance takes the form of the new streamlined advice or guidance services proposed by the FAMR, there is a risk for employers.
If there should be any more mis-selling episodes employees are likely to feel aggrieved with their employer for introducing to the workplace whichever firm caused the mis-selling.