Employers greatly underestimate the appeal of financial services as a benefit, according to recent Australian research. Teresa Russell talks to three companies about the motivation behind their programs and discovers some innovative products and services that are aimed at boosting attraction and retention strategies
Recent legislation that regulates the financial planning industry has also affected HR’s role in the organisation with respect to benefits. No-one, except a licensed financial planner, is allowed to dispense financial advice. This includes advising on things such as salary packaging/salary sacrifice or how much extra someone should contribute to a superannuation scheme. HR practitioners who dispense financial advice may now be held accountable for bad advice under law.
It is easy for the likes of banks, insurance companies or other players in the financial services industry to offer financial products and services to its own employees. For companies that operate outside this industry, more thought and effort is usually required to implement financial products and services as a part of an employee benefits package.
As with most of its HR strategies, Flight Centre has provided a unique financial solution in response to the unique financial issues of its staff. This reflects the company philosophy that “all staff be a success story in their own right”. Mark Aponas, Flight Centre’s global peopleworks leader explains that the company created a separate business called ‘Moneywi$e’ to provide staff with a financial counselling service and independent wealth creation/planning advice. “Regardless of how long an employee stays with us, we want them to leave as a better person in a professional, personal and financial sense,” says Aponas. One of Flight Centre’s philosophies is an egalitarian approach to all staff. “If the MD has access to a benefit, then so does everyone else in the company.”
Every Flight Centre employee receives between 25 and 50 per cent of their annual income in performance-based commission, meaning there are large peaks and deep troughs in month-to-month pay packets. Within three months of joining the company, every employee receives a free, individualised, financial planning session either at work or after hours if they want to include their partners. Subjects covered include budgeting, debt management and savings planning. They can then have a free annual review.
Moneywi$e currently employs 11 licensed financial planners to provide counselling, although that number is expected to increase in 2004. Financial planners receive no commissions from any of the companies whose products they recommend. The trail commission paid by the financial institution goes to Moneywi$e directly. The KPIs used to assess the financial planners’ performance have no mention of commissions paid, but instead include ‘employee wealth creation’ (in other words, growing an employee’s net wealth). Annual financial reviews are available to all staff and asset, with liability ratios determined at every review. This is the ratio against which Fight Centre’s financial planners are measured.
Moneywi$e also provides a home lending service for Flight Centre staff. Due to the high commission salary structure, many employees found it difficult to obtain a home loan by going through normal channels. Now the organisation has some pre-arranged deals with banks to provide home loans. It also has a mortgage broking service and car leasing deal that cost Flight Centre’s staff less than half that of market rates for similar services. An outside company for a special discount rate does wills and estate planning.
Another person, known as a wealth creation specialist, is employed to work with people with higher income streams who may be managing investment properties or share portfolios of their own or with their partners.
“Moneywi$e is an enormous part of our retention strategy, along with Healthwi$e and professional development,” says Aponas. The Moneywi$e business is required to provide financial services at a higher quality and a much lower rate than the external market provides. The Moneywi$e financial planning service has an uptake rate of between 90 and 95 per cent of employees. “Our staff survey consistently shows that employees highly value the service. It works for us and it works for our people.”
In 2002, when P&O Australia was introducing innovations in its superannuation offering, government reforms in financial services legislation were brought into law. It was also a time when there was a lot of media coverage about the fact that 9 per cent superannuation was not going to be enough to fund retirement. Given these three drivers, Joe Fischer, group general manager human resources for P&O Australia, sought employee feedback on what staff wanted the company to offer in terms of financial products and services.
Because HR and payroll were no longer allowed to offer advice on salary packaging and other remuneration options, staff thought the company should at least provide the names of a few reputable financial planners that gave truly independent advice. “People thought there were a lot of sharks in the financial planning industry and that they might only promote their own products. So we negotiated some good deals from two truly independent financial planning providers,” says Fischer. When HR is now approached about advice on salary packaging or other financial issues, they refer the person with the enquiry to either of the approved providers. This has brought “a level of comfort on the liability side”, according to Fischer.
Gabrielle Stringer, manager HR corporate services for P&O Ports, part of the P&O Group, explained how the program works. Both appointed providers give all employees an initial free consultation, if desired. Should the employee want a personalised financial plan, they must pay for it themselves, but at the reduced rate negotiated by the company. One of the providers regularly holds onsite seminars. Topics covered so far have been budgeting and debt management, property versus shares and retirement planning. Employees are also offered spaces at the providers’ public seminars and receive their e-newsletter. “The onsite seminars were well attended and popular with the staff,” said Stringer.
Senior managers across the company are given a free personalised financial planning session with an annual review if desired. Fischer explained the philosophy behind this benefit was that “senior managers are expected to spend all their time and effort running the company”, so they are provided assistance with managing their personal finances.
When asked about measuring the ROI of this benefit, Fischer said, “We purposefully don’t collect statistics. Each division pays the bills. It was costed and approved by the board when it was introduced, but it is such a small part of the cost of employing senior managers, it’s not worth it.” Around 50 to 60 per cent of senior people take up the financial planning benefit across the corporation.
Tony Gibbs, general manager human resources at Aristocrat Leisure says that the financial products and services offered to staff “are a small part of a whole package. If you do lots of small things for your employees, they all add up.” One of the “small things” to which he is referring is a 0.5 per cent per annum discount on mortgage rates for all employees. “We had an existing relationship with our bank, so we just went to them to see what they could offer our staff, at no cost to us,” he said. Aristocrat Leisure employees get the mortgage rate discount, small discounts on bank fees and free financial advice. Gibbs himself took advantage of the mortgage discount, and believes this to be a useful benefit.
As with many organisations, senior managers at Aristocrat get an annual financial review, paid for by the company. “We want our people to focus on work,” says Gibbs. There is no measurement of ROI on the bank-related benefits because it costs Aristocrat nothing. Almost all the senior management take advantage of the annual financial review. Assessment of the provider is done on an informal basis. When an invoice comes in from the provider, Gibbs asks the manager for feedback, which has been very positive to date.
Aristocrat Leisure has proven that regardless of the budget available to HR practitioners, at least some level of financial services benefits can be offered to staff if the organisation leverages the existing relationship with its bank.