Plotting the path of least resistance

Barclays’ behavioural team is right to be concerned that retirees will follow the path of least resistance says F&TRC director Ian McKenna

Given that every employer that has to auto enrol staff will have a relationship with a bank and that banks inevitably have a very detailed understanding of their customers and I am surprised that we have not seen more activity from them in the corporate pension market. For the most part, as in other areas of financial advice, their profile is lower than it has been for many years. One notable exception to this is Barclays who have built a substantial employee benefits consulting business over the last few years.

Recruiting from across the leading names in the consulting world, Barclays believe they have built a proposition that has greater strength and depth than traditional firms. They have certainly added some services that others will find hard to emulate, but there may still be lessons that can be learned from them.

In addition to the conventional range of consulting insight and solutions that would be expected from a quality benefits consultancy the group are leveraging their organisations core skills to offer global stock and reward services, SAYE incentive plans and workplace banking.

For larger employers the company will put personal bankers into the employer’s premises to advise staff. A cash save service can also be offered, designed around the needs of a company’s staff to increase employee engagement. Typically employees save between £50 to £250 per month over a three-year period and provided the company has achieved positive results they can benefit from a bonus when the account matures.

It is worth noting that as a group Barclays has assembled what I believe is the most talented behavioural finance team in the UK, lead by Dr Greg Davies. The team has just produced some analysis on the likely consumer reaction to both auto enrolment and the new pensions freedoms from April.  

On the former this raises flags that auto enrolment should not be seen as a silver bullet and that compulsion may lead consumers to think all their pensions needs are addressed within such arrangements, which is clearly not the case. This also highlights the dichotomy between an auto enrolment approach that assumes individuals will not make choices about saving for retirement and total freedom at retirement that will force consumers to select their options. Significantly their analysis identifies that people are likely to take the path of least resistance as guidance is not mandatory; just taking it requires moving away from the default of do nothing so there is a real risk that this is exactly what consumers will do.

This is clearly making a case for more ongoing financial education a service that Barclays can provide via their financial wellbeing services including financial education, debt counselling and remortgage advice where needed. In addition Barclays Employee Benefits offers Employee financial focus groups and workshops. These include an array of such as pictorial card to facilitate discussion on subjects people might otherwise be more reserved about discussing. There is also a Moneyworks financial wellbeing portal, which provides learning content, planning tools and the ability to purchase product

For smaller firms the company have consultants based in bank branches and they will actually take on employers with as few as five staff, something likely to be very popular as such firms stage over the next few years.

Consulting services are offered on benefits, healthcare and flex solutions and when providing solutions Barclays describe their approach as offering the “Best of Barclays and Best of the Market”, which is shorthand for a Barclays solution if they offer one and best of market where they have no offering. 

The insight reports the workplace team has been producing, such as their “Generations” analysis and the study on financial wellness that I highlighted two months ago should be essential reading for anyone in our industry.

At a time when overall the perception of banks role in financial advice is generally seen as negative I find it encouraging that at least one is trying to bring innovative solutions to employers large and small.