This view is shared by Phil Blows, director at Wealth Wizards, who says: “The crucial difference with this service is that it is delivered as an employee benefit. This is arguably the most engaging way of delivering financial advice to the workforce as employees are more likely to use the service if it is funded as part of their benefits package, rather than search and pay for the services independently.”
Mr Clarke has observed employers’ reluctance to pay advice fees to help with AE, preferring to use their own firm’s time and resources, even though these are unknown quantities.
“Is providing education to your employees going to cost you? Yes it is, in the short term, but in the long term it will potentially benefit you because those employees that might be worrying about financial stuff suddenly aren’t, and therefore their mind is much more focused on doing their job,” Mr Clarke says.
Indeed, the negative impact of poor financial wellbeing should offer a great deal of food for thought.
Staff financial wellbeing is a growing area of focus, with data showing a direct correlation between poor wealth planning and poor health. A report produced by the Financial Advice Working Group for the Treasury found that one in four workers said they have lost sleep over money worries, while 59 per cent with “current” financial worries said this prevented them performing their best at work. Employers’ attempted solutions are detailed in Chart 2.
In this context, digital advice could provide some help. Mr Blows is positioned firmly in this camp, but concedes there are serious challenges.
“In the UK, there remain roughly 20,000 financial advisers available to serve the 5m customers who can afford to pay for advice,” he says.
“AE has made a great start in getting people saving who were previously not in a workplace pension, but it is now down to scalable digital advice propositions to ensure that employees are making the most of this scheme.”
Guiding light
Integrating guidance and advice into the workplace was a recommendation of the Financial Advice Market Review, which was jointly launched by the FCA and the Treasury in August 2015. But the difficulty of differentiating advice from guidance remains central to the way in which the advice gap has endured and expanded since the RDR. Without an answer to this puzzle, the question of whether basic guidance could plug the gap remains somewhat besides the point.
Robert Gardner, co-chief executive of investment consultancy Redington, says: “There’s a lot that can be done around guidance, but people are nervous about it because of the regulatory uncertainty about what constitutes guidance or advice.”
