Should your financial wellness be down to your employer?

We’ve been hearing more and more about this thing called “financial wellness” and its close relative “financial well-being” for some while now.  Between them, the two terms now clock up three million results on Google – and next time I look I bet it’ll be more.

Nothing wrong with that.  Insofar as both terms are to do with people’s ability to manage their personal finances well, they both describe a desirable objective. 

But what I do find quite peculiar is the way that this objective has become so closely – indeed inextricably – related to the workplace.  Financial wellness is a thing which you get at work.  It seems to have several components, not always precisely or consistently defined, but all provided or at least orchestrated by employers:  a workplace pension, possibly some other “hard” financial benefits like life cover, various additional benefits like discounts on shopping and holidays, and some kind of digital platform which offers some educational content and access to a wider array of financial services and information at the employee’s own cost.

What’s in all this for the employer, apart from a lot of cost and admin?  It’s claimed that employees achieving greater financial wellness by these means will be happier, more productive and more loyal.  I can’t say I’ve seen much hard evidence for any of these claims, but to be honest even if they’re true, I think I’d still struggle to understand why employers feel a responsibility for this particular part of their workforce’s lives when most feel so little responsibility these days for most others.

If we rewind to the golden age of Victorian paternalism, we can see a group of large employers – many of them with religious and often specifically Quaker convictions – pursuing a very broad concept of wellness for their workforces and their families.  My wife grew up in Bournville, the suburb of Birmingham developed and largely owned by the Cadbury’s confectionery business, and she can confirm that for many years the Cadbury family really did provide wellness-creating facilities of every kind, from high-quality and low-cost housing in a pleasant environment through to healthcare, educational and all sorts of recreational facilities.

Slowly at first, and then with gathering speed, all these benefits gradually trickled away over the course of the 20th century, until in 2010 the business itself was sold to new American owners with none of the Cadburys’ paternalistic attitude.

Interestingly, it’s been at exactly the same time that the substance of employee wellness has been evaporating that the use of the term has been proliferating.  Cynics (e.g. me) detect the hand of the Employee Benefits Consultant in all this, expressing predictably Mandy Rice-Daviesian levels of enthusiasm for schemes requiring more employee benefits.  And we have an appropriately cynical theory that much of it’s a smokescreen designed to obscure the extent to which most employers have rowed back from those Victorian ideals in recent years.   

But for most employees and indeed employers, I wonder whether this rowing-back really needed obscuring.  I must say that over my long years as an employer, at two medium-sized advertising agencies, if I’m honest I never really felt any responsibility for my employees beyond what happened to them in the workplace, and I can’t say that my employees showed any signs of thinking less of the agencies as a result.  I never believed that if I did take on some of their out-of-the-office responsibilities, and helped them to, say, insure their cars more cheaply, or feed their families more healthily, or take summer holidays which better suited their needs, they would reward me by working harder or staying with the firm for longer.  I could certainly reward and motivate them by the traditional means of pay, promotion and recognition – and, more generally, by providing a pleasant, safe, fair and stimulating working environment.  But not being a Victorian, and running young companies without histories of providing sports fields for the Works football team and Sunday Schools for staff’s children, it never occurred to me that my responsibilities went any further.

I suppose it’s possible that my employees were disappointed about this, but they never showed any sign of it.  No employees ever came to tell me they were leaving because they’d found another agency that offered them a discount on goods from Sports Direct.  And to take a more serious example, when we offered a then-fashionable “cafeteria” system which allowed employees to choose any combination of benefits they liked by sacrificing the appropriate proportion of salary, I don’t remember anyone ever choosing to sacrifice any salary at all for anything except – in a few cases – interest-free season ticket loans.

Since then, a lot has changed and of course a lot more is arguably changing right now thanks to the coronavirus.  People’s attitudes and priorities may well be different, and I think there has been at least one really important behavioural shift:  app-driven providers like Monzo, primarily targeting millennials, are creating a degree of engagement in personal finance among their customers previously only seen among the nerdiest of hobbyists.

This is important, and I suspect provides an epicentre for this financial wellness thing.  Financial fitness apps allow these people to work on their financial wellness in the same way that physical fitness apps allow them to work on their physical wellness. 

I don’t want to underestimate this.  Significant behavioural change in personal finance is very rare, and this may be just about the biggest in my working lifetime.  But even so, I don’t think it explains the strength of the connection with the workplace.  Of course I accept that employees’ finances have an important effect on their overall state of mind, but I don’t think they’re more important than a whole lot of other things for which most employers take only a limited amount of responsibility:   employees’ and their families’ physical and mental health, their family relationships, their children’s performance at school, the trouble they’re having sleeping, their need to arrange care for their ageing parents, the fact they’re drinking a bit too much these days, their advancing male-pattern baldness, the death of a much-loved dog, the hours spent every day in traffic on the M25.

As I suggested a few paragraphs back, the best reason I can think of for employers’ continuing interest in financial wellness is some kind of lingering overhang from the era of Victorian paternalism.  If that’s right, it is a very lingering overhang indeed.  If it’s wrong, I’d be grateful for any other explanations.

What does it say about you when you can’t spell your own name?

Sorry if that screen grab is on the large side, but at least you can see what I want you to see. I was pleased to receive this email yesterday telling me that what’s probably my favourite London fish restaurant (and was probably my fathers favourite too) has now re-opened for business. But I was much less pleased – in fact I was amazed – to notice that in the email’s header the name Sheekey is spelt wrong.

I suppose the fact that I’m writing a blog about this says that I’ve become the sort of pompous old fart who complains when restaurants spell their own names wrong. In other words, it’s a blog that says much more about me than about them – and what it says about me isn’t good.

So I’ll leave it there – except only to add that I actually am pompous enough for this little error to have put me off going.

Is that nice Rishi Sunak our only line of defence these days?

Maybe it’s always been that way.  Maybe, when it comes to really huge and cataclysmic events – wars, financial crashes, tsunamis, pandemics – a nation’s treasury is the only pot of money big enough to cope with the consequences for individuals’ finances.  Maybe if anything has changed in recent years, it’s only been an increase in the frequency of such cataclysmic and near-cataclysmic events.

But it doesn’t feel quite like that.  It feels as if the other actors previously in the business of providing financial solutions of one sort or another in the event of calamity –  families, employers, the financial services industry and not forgetting individuals themselves – have largely left the stage, leaving Rishi and his counterparts in other treasuries around the world as the last actors standing.

OK, I exaggerate.  Those other actors are still playing some kind of part.  But perhaps the starkest reality that the pandemic has highlighted is the astounding – and terrifying – lack of resilience in millions of people’s lives.  Without the furlough scheme and all the other State-sponsored financial interventions, gigantic numbers of people would have lost their jobs, their incomes, their homes, many of their possessions and even the ability to feed their families.  When furlough and some of the other schemes – such as mortgage payment holidays – unwind over the next few months, a considerable number still may.

I suppose that looking back over the years, this was always the inevitable consequence of a lengthy period in which institutions of all kinds tacitly conspired to offload responsibility for private individuals’ financial wellbeing onto the shoulders of the private individuals themselves – without ever quite making it clear that this was what was happening, and that people needed to take significant action to manage the new risks they were unwittingly acquiring.

The most obvious example is the shift from DB to DC pensions, which has represented a really huge transfer of risk and responsibility from employers to individual employees – a level of risk and responsibility which employees, despite the apparent success of auto-enrolled workplace pensions, are still nowhere near shouldering.  But actually there are plenty of other examples, many of which aren’t usually seen in terms of risk transfer at all.   How many people raising mortgages to buy their council houses, for example, understood the transaction in terms of risk?  Even the winding-down of large company car fleets, increasingly replaced by private lease purchase contracts, can be sen in the same way.

Which is all fine as long as the pay cheques (pay cheques?  Who gets pay cheques these days?) keep coming in.  During the period when my family’s running costs peaked, I saw myself standing on the roof of the house, a bit like Father Christmas, pouring sackfuls of money down the chimney (who has chimneys these days?).  The money flooded out through every door and window, but for as long as I kept pouring everything would be fine.  Thankfully I never did stop pouring, and everything was fine.  But this year, in millions of homes around the country, it’s been several months since any money came down the chimney, or at least it would have been without that nice Rishi Sunak, and that isn’t fine at all.   

What’s particularly disappointing is the way that the life industry has accepted this massive burdening of its customers without a squeak of protest or (a rather different thing) a trumpeting of its commercial interest.  I remember a well-known industry leader – well, OK, it was Otto Thoresen – saying to me some years ago that if the industry isn’t in the business of helping people manage risk, then there’s no reason for its existence.  But looking at it now, you’d never guess that managing individuals’ risk had anything much to do with it.  Over a couple of decades, the large majority of big risk-managing ideas – with-profits, guarantees, final salary pensions, ASU insurance, annuities – have been whittled away, leaving… well, leaving what exactly?  Leaving pretty much what Otto feared when he spoke to me.

Where do we go from here?  Assuming we don’t want a return to The Grapes Of Wrath, and also assuming – perhaps more questionably – that all those risk-shedding institutions have absolutely no intention of taking it all back on again, it looks like a fairly binary fork in the road.

Either we carry on more or less as we are, with people terrifyingly unresilient but relying on Rishi to bail them out, or at least soften the blow, when things get really ugly (as they seem to do more and more often).

Or, belatedly, the principal actors – the State, employers and the industry – are going to have to work very much harder than ever before to help people understand the responsibilities that they are now shouldering, and to provide relevant, accessible solutions so that they can face up to them.  

As a private individual, I can’t say that I love either of these options.  But I think, on the whole, that if I am actually dealing with a massive burden of financial risk and responsibility, I’d rather be able to understand it and, maybe, at least partially, cope with it.