Are your junior staff’s finances any business of yours?

Yesterday we saw a  spike in hits on this blog from my post about Vivi Friedgut’s initiative to knock some financial sense into youngsters.

In parallel, I ran the article on a private website for corporate pension people and got a much less encouraging response. Hits were at a factor of around 250:1 !

The question on my mind this morning is whether interest in financial education is confined to  school and colleges.

It’s fashionable to think of the workplace as a platform for social initiatives. Workplace education would compete against educational programs on carbon initiatives, outreach initiatives etc. Employers sometimes complain that they are struggling to find slots for “production” in the commercial sense.

The primary function of the workplace is work. Initiatives such as financial education have to be commercially justified. Without going deep into theory, such a justification would need to rely on at least one of these three assumptions.

  1. Financially aware staff take better financial decisions, are more stable and hence more productive
  2. Employers get a dividend from an investment in financial education through greater loyalty from staff (exhibited in behaviours like not stealing/leaving/malingering and positive behaviors like working harder/smarter etc)
  3. That in investing in a socially useful way, the organisation is encouraged by tax breaks.

If anyone can point me to any reliable research which looks at the first set of assumptions, I’d like to look at it. Thinking of myself, I work best when I have no financial worries. Whether the argument works that way or the other way round “I have no financial worries when I work best” is another question.

There’s a clear link in my mind between setting goals and working to them and productivity. Aimlessness leads to boredom, worry and other non-productive behaviours like going to the pub for the afternoon.

On the other hand, a healthy bank balance is not as inspirational in terms of short-term targeting (eg commission based selling) as the risk of foreclosure!

Tactically I am driven by impecunity, strategically it’s the other way round! I suspect that most employers know this which is why most long-term incentive planning (share-save, pensions etc) is confined to organisations with long time horizons.

Which brings me on to the second set of assumptions, that there’s a long-term value to the shareholders in having a workforce that is financially literate. I think it’s a gimme that companies generally want low-staff turnover (the exception is again the bolier-room sales operation). One of the arguments that Tolstoy was  struggling with when thinking of the education of the peasants was that far from being more loyal, an educated peasant was likely to set up his own farm and compete with the landlords who’d emancipated them.

The old paternalism predicates, social order and generally does not encourage mobility. This attitude is still displayed by many employers I talk to and – alarmingly – by many union officials. I hate to say it but an emancipated workforce that knows its sharesave from its pension, has less rather than more need of a union rep and is considerably more attractive to predatory recruiters. Many managers, myself included, yearn for a placid unquestioning workforce that does what it’s told and doesn’t have the nouse to answer back.

I fear that thought in theory we want an empowered workforce who works for us because we are brilliant, in practice we want a bunch of indolent slobs who are too lazy to move jobs (even if they were employable).

At least with my third and final assumption, I can be unreservedly positive. The ability of employers to pay up to £150 per head to an educator, to write that off against corporate taxes and not to incur a PAYE or national insurance charge to the employee is in place. I suspect that this generous tax-concession is under-used and remains in place for exactly that reason.

For any employer designing a flex-program, the availability of a financial makeover, delivered in work-time at no expense to the employer (eg it’s paid for by a flex of salary by the employee) is going to look a no-brainer. Unfortunately, staff don’t see it as something they should pay for – anecdotal evidence suggests that this option is poorly used.

Which brings me back to Vivi Friedgut and her Black Bullion proposition.

I reckon I would pay for an hour of Vivi or one of her colleague’s time if I reckoned the experience would be challenging, sexy and kicked (my) arse. I would expect the session to be about me, be motivational and that it would not lead to a product sell.

Sadly, the only session I have had of this kind was mostly about compliance, was dull as ditch and led to the sale of an investment product I did not want. That was then – this is now but that’s what any financial educator has to cope with by way of “legacy”.

Our experience of delivering sessions purely on pensions suggests that they can be hugely popular if they focus on people, are motivational and lead to behavioural outcomes.

The big difference between our (First Actuarial’s) work and Vivi’s centres on the stage of the work life cycle we’re targeting. We are talking to the haves, those who have a number of years under their belts, have houses, mortgages, pensions, kids and an immediate fear of what’s ahead – retirement.

By comparison, Vivi’s customers have unsecured debts, rental agreements, hangovers, STDs and attitude. Their fear is tactical whether the hole in the wall will cough up sufficient to pay for the night out. I know I was that person and fear I may return to such a state unless I bump up my pension contributions!

Maybe there is a third market , maybe the people who are prepared to pay for the financial education of young people are those who bail them out, the parents. Maybe the flex option should not be about a financial makeover for the parent , but a financial makeover paid for by the parent and delivered to the errant child.

I have seen sexier eighteenth birthday presents but I can’t think of many better!

Put our way – this could be a “fortuitous intergenerational transfer”.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to Are your junior staff’s finances any business of yours?

  1. Mike Atkin aka Victor Meldrew says:

    Interesting perspectives as ever Henry. Bit I’m not sure you can use such a simple metric to categorise employees. What I am sure of is the very low level of financial understanding that pertains through the population. That is why we are all getting persistently ripped off by all and sundry because so few actually challenge the status quo.
    On the employee side-looking around I can see all sorts of different employees ranging from the financially secure coasting quietly to retirement to the younger element keeping their heads down and arses up because they need to pay their credit card bill every month. Neither are ideal because they don’t want to rock the boat so they ain’t going to be too innovative or challenging. Or maybe they are ideal because they’ll do as they are told. Then there are the ones in between. I think your reference to Tolstoy is quite appropriate. Undereducate the masses, encourage them to get in to debt and keep them distracted with cheap alcohol and you end up with a slightly dysfunctional, disparate population that is not going to revolt.
    Like yourself I’m left asking the question – Who would really want to financially educate the masses, It should be schools and parents, but if they don’t understand themselves……..
    Its not going to be business or service vendors because we’ll then see through them.
    And what are you going to teach them, if you could get someone to underwrite it……
    Most of it is basic common sense. The so called clever stuff seems to be a script devised by the herd leader and promulgated by the herd. Probably not particularly appropriate to current times but its still churned out ad nauseum. And when its obviously wrong the pundits seem to have a reason for it being wrong, its priced in or if its not priced in its not their fault that the markets are acting so unreasonably. etc etc

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