“If you try and sell a pension to a 22 year old – even though it’s absolutely the right thing to do – you are on a hiding to nothing,” says Colin Williams, managing director, corporate, at Friends Life
It’s an arresting, if sobering opening salvo from Colin Williams, managing director, corporate, at Friends Life, as he talks candidly about one of the most pressing difficulties in developing a strategy for giving employees access to workplace savings. One solution that Williams and Friends Life are focusing on is corporate platforms (also called ‘corporate wraps’), a one-stop-shop for providing employees with access to Workplace ISAs (WISAs) and other savings products.
But are employers genuinely interested in offering their staff corporate platforms, or are they simply a gateway for financial service providers like Friends Life to muscle in and sell more products? Williams is clear: “We are seeing a lot of market demand,” he says. “Larger employers with existing flexible benefits and broad benefit structures are starting to come to us with very clearly thought-through requirements.”
According to Williams, corporate platforms are as much about the behind-the-scenes technology that ties different financial benefits together as they are about the products themselves. As such, he argues smaller firms can also take advantage. “Corporate platforms used to be something that only FTSE 100 firms could access,” he says. “Technology has changed this. It’s now easier for a 250-staff company to put together a flexible savings solution for their employees.”
Some argue mid-market employers will scarcely have the time to think about broader workplace savings when they already have the cost and complexity of auto-enrolment to deal with. Even larger organisations, are demonstrating what Williams calls ‘thinking in live’ – having belatedly realised pensions don’t sit in isolation from the rest of the business, employers are having to implement their strategy as they plan it.
However, he is confident this is changing and businesses will use the opportunity offered by auto-enrolment to review thier benefits more broadly. “Employers will have a very clear line of sight about getting auto-enrolment working. More enlightened employers will also think that while they have the bonnet up on their benefits strategy, it is also a good time to have a wider review.”
Part of the workplace savings challenge is helping both individuals and employers understand what products will work for them. Enabling the employer to deliver this, he posits, requires advice. And with forthcoming changes brought about by the Retail Distribution Review, getting access to that advice may become even more difficult and costly: “Employers will have to find a way of funding the advice they should be taking. Corporates will need advice because even in the contract-based pension area, they are acting in their employees’ interest.
“But at the individual level, I feel there is going to be an advice gap. Wealthy individuals will be able – and willing – to pay fees for it; there will be no advice at all for the lowest paid, and a big gap in the middle where there will be desperate need for affordable advice. The problem for firms is that this will be difficult to deliver in a cost-effective way.”
Williams says Friends Life’s response has been to “step into the gap” with what he calls “information-rich guidance.”
His use of the word ‘guidance’ is carefully judged. Advice is a thorny area for anyone associated with financial products, from pension scheme trustees to fund providers. Defining where the boundary lies between guidance (which can be given by non-professionals such as pension scheme trustees) and advice (which must be delivered by a professional adviser) is still very much debated.
“We need to have a better view on what constitutes advice,” demands Williams. “Often, what we describe as advice is more about providing people with the information to make their own decisions. People aren’t stupid,” he continues. “There’s often a suggestion that everyone needs to be spoon-fed information. But people have families, they work, they manage to run their lives. Most people just need the right information to make the right decisions.”
Right now Friends Life says it is busy building online tools to support that decision-making. “We have a large financial education team and they have a very clear idea of where we take these tools,” says Williams.
Technology (web, email, social media), has opened up many new ways of delivering guidance and advice – but Williams cautions that having more information channels doesn’t necessarily mean better quality guidance. “It would be easy to flood the market with irrelevant developments – but for us the important thing is understanding what makes a difference for the customer,” he says.
The same applies to the types of information the pensions and savings industry produces. “Because we spend a lot of time creating clever default funds and other vehicles, we tend to like to spend a lot of time explaining them,” he concedes. “But if you buy a television, you don’t want to see the wiring inside it. You just want to know about the sound and picture quality and whether it will fit in your living room. We have to take the same approach to financial products.”