This article is just an example of the content available to mallowstreet members.
On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.
All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.
Could the way we speak to pension scheme members change their attitude to advice? Some in the industry believe that communication can play a big part in financial advice take up.
Joe Craig, development lead at communication consultant Quietroom, speaks on communication and engagement in a new episode of our mallowstreet talks podcast. He also addressed how language is important in helping pension scheme members feel comfortable with their pension scheme.
“We make decisions based on how we feel about the person or organisation giving us the information,” Craig says. “It's how you feel not what you know.”
This definitely rings true for recent findings on the take up of financial advice. A survey conducted this year by advice firm My Pension Expert found that out of 2,000 respondents, more than half did not trust financial advisers.
Creating a pension scheme and member relationship
Craig stresses that as a scheme, building your relationship with your members is important. Instead of focusing on what method of communication your scheme is using, he challenges what method of listening you’re using.
“How are you finding out what [...] people want?... What their questions are? How open are you in that conversation? What do you know about what a [...] person knows about how to get in touch with you?” he says.
According to the survey, 38% of UK adults had sought independent financial advice at some point in their lives. In contrast, 65% said they prefer to use free online advice services. “You can go on any social media, browse for two minutes and find someone under the age of 25 asking for financial advice,” Craig says.
As the figures reveal, the percentage of those taking financial advice is low, and those willing to pay even lower. “That's someone who's asking the world – asking people they don't know on the internet – for financial advice, over the trustees of their workplace pension scheme,” Craig points out. “So, what are you doing to open up that channel so that people come to you first, not necessarily for regulated financial advice, but as a source of support?”
The Financial Conduct Authority published a report in September 2020 which revealed that 42% of savers were taking more than 8% from their pensions each year.
Although there are other factors that influence this figure, one argument is that people have not taken enough financial advice. It was found that savers with smaller pension pots, typically worth between £10,000 and £100,000, were particularly susceptible to high withdrawal rates. This is backed up by figures from an Aegon survey released in December 2019 which found a quarter of respondents thought that regulated financial advice is only for those with over £100,000 in their pension pot.
This circles back to the idea of having a relationship between saver and pension scheme. “Whatever the method of communication, if you don't get the tone of that right and it's not part of a story that engages the emotions and helps people to trust you and trust the institution, then it's not going to work,” says Craig.
The difference between advice and guidance
On top of this, there are barriers to advice, such as lack of knowledge of language - for example, understanding the difference between advice and guidance. Guidance consists of impartial recommendations to help an individual make decisions about their finances. In contrast, independent financial advice is regulated by the FCA and involves a detailed analysis of an individual’s personal finances and financial goals.
“If you say to people, ‘What are you really looking for?’ they just say, ‘I just need a little bit of advice’ and they're using it in the everyday conversational sense, not the regulator sense because they don't know it's a whole regulated area,” Craig says. “Maybe we need to be much less worried about the touchy issue of ‘are we getting close to that line’. You can get a lot closer to that line than you think you can.”
At the oral evidence session on accessing pension savings held by the Work and Pensions Committee last month, there was also a call for clearer advice and guidance for savers. Some panel members felt that a clearer definition of advice and guidance would help improve outcomes, including clearer rules on what constitutes advice.
How can schemes build upon a trustworthy relationship with their members?
To hear more, look out for our newest episode of mallowstreet talks coming soon.