Kickback questions for EBCs entering utility switching space

Mercer HarmoniseMercer’s move into utility switching offers the chance to deliver real benefit to employees – but utility switch deals also carry potential risks over disclosure of revenues and whether offers are table-topping. John Greenwood investigates

Financial capability, financial resilience and financial wellbeing are key buzzwords at the moment, and with good reason. The impact of money worries on individuals’ performance, health and wellbeing can be extremely negative, both for the employees concerned and for the bottom line of the companies they work for.

Research published by the Social Market Foundation shows that 13 per cent of workers say money worries hinder their concentration at work, and 24 per cent are just about managing financially. The research, published earlier this year, found 40 per cent of workers said they had been stressed out by money worries over the past 12 months.

Mercer has clearly spotted this as a key area where it can help out with its Mercer Harmonise proposition.

Mercer partner Niall O’Callaghan says: “Time is a precious commodity for employees. We are aiming to provide a range of benefits that drive convenience and simplify life but do not increase cost for the employer.”

To this end, Harmonise is showing employees how to save money on their utilities, effectively offering a similar service to other comparison sites such as USwitch, Moneysupermarket and Comparethemarket. Indeed, its recent press release pointing out that ‘employees waste an average of £300 a year by not switching utility providers’ pressed exactly the sort of money management argument that price comparison switching sites have been doing for years.

Utility switching is essential these days, with some providers jacking up prices by as much as 25 per cent when fixed-term deals come to an end. Compared to charges in the regulated pension market, the consumer detriment in the utilities sector is potentially massive for individuals – made worse by the fact that providers require individual logins, often in obtusely complex formats that it is hard to believe are not designed to make the user not feel like bothering to check just how much they are being overcharged.

Once the user has loaded their details into Mercer Harmonise, they do not have to search for multiple logins, giving them an easy way to keep a handle on which bills they should consider changing.

But does entering the realm of personal finance helpers also carry risks for an employee benefits consultancy?

One key area is the extent to which kickbacks are received for switching. Price comparison sites receive chunky payments for each referral – and will an employee be comfortable with their employer subsidising their benefits offering by profiting from their utility switching? Mercer has not disclosed whether it receives any financial benefit from employers switching through Harmonise. It says it is unable to comment because this is ‘commercially sensitive’, although it declined to deny that it received money back from the service.

F&TRC director Ian McKenna says: “If you are saving £300 on your utilities, you are not going to be that bothered if you are paying some money for a service that helps you do that. As long as it is properly disclosed, I can’t see a problem.”

Rival Aon’s Bigblue does not currently offer aggregation of utility data. Aon’s Debbie Falvey says: “You could use Bigblue to manage money in that way but we have not gone down that path just yet.

“We are giving people tools to create financial aggregation but that does not go as far as the utility comparison. We do not back into comparison sites; we use real-time data feeds. It is something that could be done in the future but we have not stitched on utility functionality yet.

“That does not mean we will not be making other forms of offer to members. Four example, we have a tax return service, with which we can offer people a better deal. And we are confident that it is a good deal.”

But she cautions against imitating Mercer. “If you are an employee or a trustee, do you really want to get into this sort of thing? Because if it goes horribly wrong, you are going to look pretty bad. Utilities change so quickly, so we would want to avoid getting into the sort of problem that Age Concern got into where it was recommending a deal that was not table-topping.”

Hargreaves Lansdown head of pensions policy Tom McPhail says: “The idea of helping people with their personal finances is a good one fundamentally, but there are reputational risks over how you structure deals, and whether you get a kickback for helping people, and if so how this is disclosed.

“The provision of utility broking should not be a regulated activity, but the FCA may be upset if it sees intermediaries taking a turn on its employee base. It’s a question of transparency and how you manage the conflict of interest.”

This is clearly an area of immense benefit to employees – but it will have to be navigated with sense and transparency.