With doubts being raised about provider commitment to workplace marketing, employers could be set for a series of dilemmas, says Victoria Furness
Case study – Malmaison and Hotel du Vin
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The proposition behind worksite marketing – the sale of financial products to people through their workplace – was once compelling enough to persuade several financial services firms to jump into the market. However, with Abbey at Work departing the market last year and Halifax Bank of Scotland (HBOS) announcing its exit in January, employers might well be questioning the future of worksite marketing and whether it is a method they should be using to offer staff financial education.
Phil Ainsley, senior manager for Employee Benefit Services at Lloyds TSB Registrars, says: "I believe there has been a sea change in thinking over the last 18 months by both service providers and employers about financial worksite marketing." Lloyds TSB Registrars took over responsibility for the bank’s Bringme voluntary benefits brand – through which it sells financial products to employees in the workplace – last January.
Yet with industry rumours circulating that Lloyds TSB Registrars is up for sale, its current line up of services can not be taken for granted. Ainsley, however, is quick to dismiss matters: "I’ve worked for Lloyds TSB Registrars for more than ten years [and] I’ve learnt to take [rumours] with a pinch of salt."
That said, there is some uncertainty in the worksite market, largely fuelled by the departure of HBOS and Abbey. Furthermore, with websites such as confused.com and moneysupermarket.com providing an easy way for individuals to source insurance and other financial services online, the need for worksite marketing has become questionable.
Research into the distribution channels people use to buy banking and insurance products by market research firm Finaccord does little to promote the case for worksite marketing. Its Channel metrics survey published at the end of 2005 looked at what channels 5,000 consumers had used to purchase goods during the year. "About a third of people had bought personal medical insurance through the worksite, 17% had bought health and hospital cash plans, but for everything else it was single digits," reveals Alan Leach, director of research at Finaccord.
Such figures suggest the business case behind worksite marketing perhaps isn’t as strong as it once was. Indeed, costs were cited as the principal reason for both HBOS and Abbey’s exit from the market. "I guess if you’re going to do direct face-to-face work, which HBOS and Abbey did, the amount of manpower you have to put in place means you have to make sure you sell a lot of [financial services] and, at the end of the day, it’s not an economic proposition that stands up," argues Ainsley. He adds that the market has evolved away from providers marketing just their own products in the workplace. "We now source products from a number of different providers and charge fees for the service."
The positioning of Lloyds TSB’s offering has also altered, with Bringme now promoted as an adjunct to its flexible benefits administration service rather than as a standalone offering. Similarly, You at Work, the employee benefits provider owned by Barclays, has moved away from marketing individual financial services products to offering a broader package of lifestyle benefits – of which financial services products are just one element. Adam Maher, head of commercial development at You at Work, says: "What we provide is the sourcing, management and promotion of a wider package of benefits. We don’t earn revenue on the commission of insurance sales, [instead] we receive subscription fees for creating, managing and communicating a package on the employer’s behalf."
Michael Whitfield, managing director of employee benefits provider Thomsons Online Benefits, believes that worksite marketing of standalone financial service products cannot exist on its own anymore. "It has to be part of an overall reward strategy. It’s not about marketing standalone credit cards, it’s about education and making sure you’re providing products that add real value."
Indeed, education is becoming a key word when discussing financial services in the workplace, with employers under more pressure than ever to play their part in creating a financially literate population. Phil Hutchinson, a principal at Mercer Human Resource Consulting, predicts: "The whole idea of financial advice in the workplace will increase this year, driven by the Financial Services Authority (FSA) and employers wanting an ethical backstop."
As a result, financial education is becoming a true key component in many providers’ worksite marketing. For example, many of the commitments HBOS has agreed to honour until the end of this year revolve around it delivering financial education seminars to staff in the workplace. David Parish, former head of financial education at HBOS, who is still with the company but awaiting a new job title, explains: "The difference with worksite marketing is you’re focusing on the marketing element, you’re putting a poster up or setting up a trestle table with brochures and you’re marketing to people that talk to you. With financial education, you’re giving people enough information through a seminar to help them make an informed decision."
Employers that want to offer more of an impartial viewpoint are increasingly turning to independent financial advisers (IFAs), particularly for offering employees financial advice around key life events. Paul Nelson, a director at IFA firm Chiltern Consultancy, notes: "We are seeing a rise in advice and education specifically focused on share option schemes or mortgage advice to employees. And quite a number of IFA firms are offering advice to employees approaching retirement."
Far from heralding the end of worksite marketing, these changes signal what worksite marketing will look like in future. Jim Dredge, workplace programme director at the FSA, says: "There’s plenty of room in the employee benefits arena for all sorts of providers and a full range of products. But when providing a product, you’ve got to look at what employees want, compared to what providers want to provide." As in other areas of employee benefits provision, it comes down to the simple economics of supply and demand – unless employees are interested in what providers are offering, they just won’t be tempted to buy
No employer wants to be held to account by an employee that has had a bad experience with a financial product bought through the workplace.
Charles Cotton, adviser for reward at the Chartered Institute for Personnel and Development, asks: "If there’s a problem who is the employee going to blame, rightly or wrongly?"
Adam Maher, head of commercial development at You at Work, says that if an organisation is seen to be promoting products sold through the workplace, it has to ensure what is on offer will provide value. "It has to have broad appeal across what’s an increasingly diverse workforce, be from a reputable company with good financial standing, and supported by the right service level agreement to ensure that employees’ expectations are met," he explains.
Phil Hutchinson, a principal at Mercer Human Resource Consulting, adds: "You can’t put one of these things in and [just] expect it to work. You’ve got to think how you communicate it to aid buy-in and improve product deals continuously."
Case study – Malmaison and Hotel du Vin
Hotel group, Malmaison and Hotel du Vin, is one of the employers left reconsidering its options after the decision by HBOS to close its worksite marketing arm. The hotel group launched a voluntary benefits scheme through HBOS in the summer of 2005 offering employees access to products such as mortgages and loans.
HBOS carried out some worksite marketing when the scheme first launched. Sean Wheeler, group director of people development at Malmaison, says: "There was a presentation with special offers and we had posters up, but they didn’t do the hard sell, which was good as I was wary of that.
"HBOS was good, we were sad to lose them," he adds.
Although take-up of financial products and other services through the scheme wasn’t spectacular, employers showed interest in CDs, car equipment and ladies lingerie.
Despite this, Wheeler believes offering a voluntary benefits scheme assists with recruitment and retention and is currently investigating two alternative solutions for the company.
The first is setting up a series of local discounts with nearby gyms, hairdressers and clothing shops, as staff have expressed an interest in this type of scheme.
The second is a standard voluntary benefits package featuring products such as healthcare cash plans. The supplier Wheeler is in talks with is the provider of its employee assistance programme.