· 5 min read · Features

Financial Education - Give staff the facts about the figures


Firms deterred from providing financial education for fear of falling foul of Financial Services Authority rules are missing a chance to promote their benefits package's value.

The sorts of things some people will sue for in the US hardly comes as a surprise these days. But last year HR directors would have been alarmed to learn of a claim one employee - James La Rue from DeWolff Boberg & Associates - took to the courts. Not only did he sue his employer for not providing him with enough financial education about his pension, he actually won.

La Rue put his bosses in the dock because he claimed he had received no warning or advice from his company and had suffered significant losses to his defined-contribution pension scheme as a result. The Supreme Court agreed, ruling employers are the fiduciaries of their own pension schemes and, as such, must take the right measures - including providing financial education - to protect their employees' investments.

While a similar case is unlikely to surface on this side of the pond any time soon - in the UK financial advice cannot be issued directly and can only be imparted by advisers regulated by the Financial Services Authority (FSA) - the case reflects growing awareness by staff that their employers should arm them with the facts they need for managing their reward packages.

Earlier this year, research by HR/Vebnet found only 30% of employers were confident their staff had enough information to adequately plan for their retirement and when HR magazine asked Harris Interactive to poll 1,500 staff last month, a majority (56%) of employees admitted they would like some form of financial education at work. Currently only 15% said they are sure their employer offers financial education, while a further 11% are not sure if they can have it or not.

So are employers really aware of what their staff expect of them, and are they doing anything about it? Thomas Humphris, head office HR and UK reward director at publishing firm Informa, explains: "The case in America ought to bring home the point to employers that it is their moral obligation to offer some form of financial education." But the problem, say some, is that employers are still unsure just how far they are allowed to go for fear that it constitutes 'advice'. In essence, they suffer the reverse problem - they worry giving explicit advice could leave them vulnerable to litigation if employees actually act on it.

"Anecdotal evidence shows employers' views of financial education are mixed," says Richard Morgan, director of consultancy services at Vebnet. "Some will see it as an opportunity to help staff understand broad finances - as well as a tool to assist them to understand and appreciate their workplace's employee benefits offering. But some shy away from it, worrying they will get too close to offering staff advice on finances."

The good news is that the FSA will visit workplaces to give staff presentations on financial education, at no cost to employers. The financial services watchdog will also talk to staff about finances as a group and answer questions but, according to Annette Cox, assistant director at the Institute for Employment Studies, this is not a one-size-fits-all approach.

"The people who most appreciate FSA financial education are lower earners. Higher-earning staff would have a differing expectation of the future with more complex financial needs," she explains. "So in the longer term, the FSA will need to come up with a more diverse range of services to cater for staff with differing financial capabilities."

Morgan agrees: "The FSA does a very good job and employers can use it as a starting point. But their advice is simple and will apply to the masses. The next level for employers is to develop more detailed information of their own."

Should HR directors decide to do this, they must expect to have to re-educate on a large scale. A fly in the ointment is the fact the HR/Harris Interactive survey also found 26% of staff said they do not want the service from their employer. Cox explains: "The problem businesses face is that unless someone is a financial expert they might not realise they need financial education - but they do. Also, staff might be concerned about employers getting involved in their finances, so there needs to be clear, targeted communication to reassure them."

By law, financial education must be solely fact-based. It has to be completely independent of providers and should only give staff information about pensions, investments and financial tools.

But provided employers stay within these boundaries with a cleverly thought-out, cost-effective financial education initiative, they can help staff with their finances, reduce stress, promote wellbeing at work and increase take-up of employee benefit schemes. Morgan explains: "Employers should take the opportunity to communicate their reward schemes better rather than throwing money into more provision."

One method growing in popularity is to use more use of video and online content (see Marks & Spencer case study opposite). Russell Goldsmith, digital media director at broadcast agency Markettiers4dc, says: "Using broadcast techniques to provide financial education through internal communications allows management to engage with its employees and is particularly cost-effective for those organisations spread across the country, or indeed, the globe," he says.

Goldsmith explains that, as regular consumers of media delivered over the web and on mobile devices, employees have high expectations of how they receive content, wanting to watch video or listen to audio and not just be provided with text to read. Tactics that can be used include live and interactive web TV chat shows, live radio programmes, podcasts and downloadable video guides. These methods are already proving popular with time-poor members of staff and also benefit from being able to send in questions anonymously. Online delivery also means employees can then come back and view the show on demand in their own time.

Goldsmith adds: "In the case of financial education in particular, even if you are a top company director it does not necessarily mean you understand how best to manage your own personal finance and any help that can be provided by the company, delivered in what feels like an engaging one-to-one experience, has to be a positive thing."

Traditionally, employers that looked after workers' finances have been seen as 'paternalistic' and some could be forgiven for worrying financial education is patronising or intrusive. But Humphris is adamant this is not the case. "It's not about patronising staff, but empowering them," he says. "In many cases it is not reasonable for employers to increase salary or benefits, so financial education is about helping staff make the most of what they have."


When Marks and Spencer's share scheme came up for release, the retailer decided to use a video broadcast to provide staff with help and advice. The company thought a TV chat show would be an innovative way to inform them of their options when the shares were released and also show them how best to make the scheme work for them.

Working with How to TV, M&S filmed a 20-minute pre-recorded video, covering subjects such as income tax, capital gains tax, and how to minimise share liabilities by putting shares into pensions and transferring shares to spouses or civil partners. The video also looked at different investment opportunities - such as shares vs cash.

The video took the form of a chat show featuring a professional presenter, Anne Govier, senior remuneration and employee share schemes manager at M&S, and Alan Page from Killik Employee Share Services. Managers were invited to submit questions - and 400 did. The show could have been streamed live but Marks & Spencer chose to pre-record it and it was hosted on a website where staff could view it in their own time.

Govier explains: "Getting people to seminars is not always easy with busy diaries, and sometimes reading financial information is not easy. Our presentation allowed staff to ask their own questions so it was tailored to what they wanted to know. We have had fantastic feedback."

Pensions 52%
ISAs 26%
Not sure 24%
Share options 23%
Mortgages 22%
Debt management 18%
Source HR Magazine/Harris Interactive.


Publishing group Informa has taken a proactive approach to communicating both its benefits offering and financial education. It has just completed a trial, in which it invited FSA-regulated representatives from its pension provider Friends Provident to talk to staff about savings, investment pros and cons and other financial issues to groups of staff. The session gave staff scenarios and information on what to do with their money in different cases.

Thomas Humphris, UK head office and reward director at Informa, says: "It is not about telling staff they must invest in a pension but about raising awareness of the issues they should be concerned with."

The company also provides staff with free meetings with a mortgage adviser and 150 employees have taken up the offer over the last year. Staff can view more financial information on the company website and Humphris is also considering adding financial information podcasts in the future.