Giving staff access to mortgage advice can provide employers with a high-impact low-cost perk, says Laverne Hadaway.
Buying a house is probably the biggest purchase decision most people will ever make during their lives. Finding the right mortgage deal, let alone choosing a property and moving can be a worrying and time-consuming task. So to help reduce the stress employees face, employers are increasingly offering access to information and advice on different types of mortgages.
One company that specialises in financial education for employees is Close Wealth Management. Tony Newman, employer solutions manager, points out that mortgages are just one of many things that employees have to juggle when it comes to financial commitments. "When I first started working, credit cards didn’t exist, and you could get a mortgage quite quickly and easily. Nowadays, people have student loans, credit card debt, overdrafts and so on," he says.
Close Wealth Management runs seminars for employees on how to structure and organise debt, looking at issues such as what should be paid off first, which debts can be rolled into a mortgage and which should not be. Newman stresses the importance of distinguishing between long and short-term debt. "People need to know that they shouldn’t buy a car or pay for a holiday on a mortgage," he says.
If an organisation is thinking of drafting in an outside service to give its employees financial advice, how can it choose which provider to opt for and ensure that its staff are given appropriate advice?
Cash rich, time poor
Grant Holmes, associate director at Charles Cameron & Associates, a city-based specialist in bespoke mortgages for high-net-worth individuals, says he has seen an increase in the demand for its services. The firm specialises in advising the invariably wealthy employees of City-based firms, who are often cash rich but time poor. "We’ve seen a growing demand for this sort of service and we’ve set up dedicated teams to meet the level of enquiries," says Holmes.
The company also tries to match the right advisers to the right employees. In a law firm, for example, they could be dealing with anyone from a junior clerk charging out at £50 per hour to a partner earning £600 per hour. The partner may be buying a property worth £3m or £4m, while the junior may be remortgaging for £250,000, for example. So it will send a senior level adviser for the partner, whereas all advisers will be able to give good quality advice to the junior.
Despite the financial sophistication of many of the employees that the company deals with, Holmes says many do not know that much about the mortgage market. "It’s easy to assume that they are well informed, but why should an investment banker know more about mortgages? It’s surprising how many people will sit on a variable rate once their mortgage deal has ended. They are nowhere near as proactive as we think."
Zoey White, national accounts manager at Halifax Bank of Scotland (HBOS), has made similar observations. "Generally, people aren’t so clued up. A certain percentage are, but the majority are not," she says. HBOS provides mortgage information to employees as part of a financial education programme. It offers a one-size-fits-all service to firms of between 300 and 3,000 staff and can provide a more bespoke service tailored to firms with 3,000 or more employees.
Financial education and information is delivered via a range of channels, including the internet, posters, booklets, leaflets and through roadshows or seminars, depending on demand. "We help people make more informed decisions by educating them about the housing market," says White. One popular seminar is based on HBOS’ economic forecast looking at issues such as the stability of the housing market and what is likely to happen to interest rates. "Everyone wants to know what’s happening. They’re not sure if they’re in the right deal, where to go for advice, how mortgages operate and so on" she adds.
Seminars typically consist of generic question and answer sessions, however, employers can also arrange for staff to speak to advisers on a one-to-one basis if required. Providers that offer these services include HBOS, Charles Cameron & Associates and independent mortgage advisers John Charcol.
However, there is some difference in opinion among the various types of providers operating in the marketplace over which is best placed to offer such advice. Ray Boulger, senior technical manager at John Charcol, for example, is concerned about mortgage lenders such as HBOS linking up directly with employers. Independent advisers, such as John Charcol and Charles Cameron & Associates, may be able to offer advice on a wider range of products from a number of providers, he believes.
Boulger also says that while lenders may negotiate special deals for employees, such as a reduction in fees or a better interest rate, these still may not be the best deal available across the market. "What good is it for a high-net-worth borrower to save £100 on the arrangement fee for their mortgage? That’s peanuts, when there may be a much better product out there for the employee," he explains.
Minimal employer cost
HBOS’s White does not deny that employees who take up its products may not be getting the best available deal for them on the market at the time, but argues that this is not necessarily the point. "We would expect them to have done the shopping around, but their buying from us is also about service and convenience rather than spending their whole lunchtime sorting out their mortgage," she explains.
So what do employers get out of arranging mortgage advice for staff? White believes employers feel they are fulfiling their corporate responsibility by providing such benefits. Boulger agrees, adding that it enables employers to provide an additional employee benefit that costs them nothing except time and effort. "There is no direct cost to the employer, but if the employee perceives that they have received good service, it casts their employer in a positive light," he says. Holmes has a similar perspective. "There’s no material gain for the employer, but it shows that they care," he says. He also argues employers enjoy peace of mind that their employees’ mortgage affairs are being looked after properly.
Raise the roof
- Choosing a mortgage can be time consuming so employers are increasingly beginning to offer employees access to information and advice in the workplace.
- While people are generally aware of different mortgages and how they work, they are not always well informed about them.
- Lenders and advisers offer employees financial education on the housing market, different types of mortgage and economic forecasts, via the internet, seminars and booklets.
- Employees can also access one-toone advice.
- Whether staff receive independent advice about the best product on the market for them, however, depends on the type of adviser employers select. Lenders will usually only advise on their own products.
- Employees may enjoy special discounted deals or a reduction in fees as an incentive to use their employer’s nominated firm.
- Most staff appreciate the service and convenience of easy access to advice and information in the workplace.
- Some employers see such services as fulfiling a responsibility towards staff.
Case study: Capgemini
IT consultancy Capgemini decided to offer a financial education package to employees after its HR department received numerous requests for help with financial queries, especially about mortgages.Many of the firm’s 6,500 employees are based at client sites spread throughout the UK. In order to fit in with their working patterns, it was decided that HBOS would provide work-based seminars.
These tend to cover the types of mortgage available, an overview of the housing market, interest rates and HBOS’ economic forecast.
Employees could also make appointments for face-to-face advice with an HBOS adviser. About 350 employees took advantage of the offer, resulting in around £2m worth of mortgage advances.