Jenny Keefe talks to Jim Dredge, programme director for the workplace arm of the Financial Services Authority’s Financial Capability Scheme
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Let’s be frank: most people find personal finance about as stimulating as a week in solitary confinement. Yet Jim Dredge, programme director for the workplace arm of the Financial Services Authority’s (FSA) Financial Capability scheme, is on a mission to transform UK employees into savvy consumers capable of making good financial decisions.
The scheme is working with organisations to teach staff how to make the most of their money. It’s part of the FSA’s three-pronged attack on financial illiteracy, which targets schools and universities as well as workplaces.
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It’s a tall order. According to a 2005 survey by business information firm Docucorp, three-quarters of Britons would rather read the back of a cornflake packet than their bank statements. Last year, the Prudential/Citizen’s Advice financial literacy survey found that 15% of 18-24 year-olds think an Isa (individual savings account) is an accessory for an Ipod.
Members of the Financial Capability Group are drawn from the FSA, the Citizen’s Advice Bureau, the Confederation of British Industry and financial education charities. “It’s the only way we could pull together a multi-skilled task force properly,” says Dredge.
He believes financial education needs to go back to basics. “What’s confusing employees as much as anything is just some of the most basic building blocks such as ‘how do you budget?’
What employers are very good at is, when they offer schemes like the pension plans or share schemes, generally they will make a whole effort to explain them to employees. But these products are only one part of a whole financial arrangement.”
The FSA Consumer research report 2004 found that four-out-of-ten employees had learned nothing about finance from their employers, yet six-out-of ten staff said that an education scheme would make them more confident in dealing with money.
While the group has made some headway in schools – the government has announced that from 2008, personal finance will be part of the maths syllabus – there are still whole generations that are clueless about cash.
“We’ve got 28 million people in the workplace that perhaps could do with a little pick up in the office. Hopefully they will tell their partners and children, and word will spread that way.” Dredge has just completed a 12-month pilot scheme, which involved several large organisations and a total of 12,000 staff. Employers involved included Scottish Power with 8,500 employees and Stagecoach with 150 staff based in Nuneaton.
“It was a two-part offer. Everyone got some base material covering understanding their payslip, understanding their pension, and looking at basic questions such as ‘what is an annual percentage rate (APR)?'” he says. Aside from leaflets on these topics, staff take home a personal finance magazine called Cashwise from the BBC.
Dredge also runs a workshop, aimed at shining a torch into the dark corners of personal finance. “We offer people the opportunity to come to a one hour seminar that covers things in a lot more detail. It looks at where you can go to get the best value from things, decide what your financial goals are and what you need to do to get there.”
While the only cost to employers is releasing staff for an hour to attend the seminar, there are several rewards to be had. “The other thing we brought to the seminars, part way through, was we reaffirmed the employer’s benefits. So if the firms offered anything, from holidays to pensions, we spent a few minutes talking about the benefits they provided. Also, if they offered a menu of choices such as a flexible benefits scheme, we went through the options.
“The employers found it very helpful, because it’s one of the big unclears when you’re working for a firm. [Employees] may be aware how much they’re earning per hour but they’re unaware of the firm’s other benefits.”
Clued up staff also make better workers. “If you have financial problems these may be on your mind when you’re at work. It’s hard to concentrate if the phone is ringing and you’re not sure who’s at the other end. If employers can help, it will lead to a better regard for that employer.”
He adds that staff who have sorted their finances are less likely to suffer from the stress associated with debt and other financial difficulties, so financial education can even have an impact on sickness absence.
This all sounds great in theory. But can a one-hour presentation really turn workers into financial whiz-kids overnight? “We don’t believe for one minute that coming to see us for one hour is going to solve everything. The main signpost was where you can go next for help. We gave them a massive list of all the websites you can use,” says Dredge.
Employers may have concerns that some of the workshop presenters will try and sell their own products as five out of the ten are from banks. “The important thing here is that the controls we’ve got are extremely strong. It’s probably one of the most highly regulated environments that there are. We also engaged an external group of market researchers to get an external report of what went on. Everyone was asked to complete an external ‘how was it for you form’ and 85% said it was pitched at the right level,” he explains.
Cynics may argue that, even if speakers are not allowed to steer staff towards a specific bank, responsibility for financial education should lie with the government rather than the financial services industry, which aims to make money from customers. For instance, would a bank advise staff to switch between credit cards with 0% interest rates, when it might lose them money?
“What we say on credit cards is you’ve really got to understand where you are with it. The 0% [interest] schemes are gradually disappearing and if you’re doing it you need to make sure you’ve got a method of paying it off before the due day [when the 0% period runs out].”
Dredge admits that finding presenters outside of banking is difficult. “Almost anyone who understands financial services itself is probably working in the industry somewhere. We are talking to the unions and one of the projects we’re looking at is training union reps and HR managers to teach them how to teach.”
Over the next two years, Dredge has his work cut out, as the programme will be rolled-out to over 200,000 employees across the country. The aim is that by 2010, four million employees will have had access to some form of financial training in their workplace, with half a million attending a seminar.
- Jim Dredge originally joined the financial services industry on the bottom rung of a high street bank.
- He worked his way steadily up the ladder until after 15 years in branch banking, he was managing a group of 15 branches and 200 employees in Watford.
- This was followed by six years working in various functions at Lloyds TSB, including strategy, product management, marketing, sales planning and commercial development.
- For the last year, he has been working in partnership with the Financial Services Authority, as programme director for the workplace arm of its Financial Capability scheme.
Financial literacy research
- A 2005 survey by Docucorp found that 87% of women and 58% of men would rather read product packaging or their horoscope than bank statements. Only 15% of respondents under 30 read their financial correspondence.
- While only a third of people say they have learned at least about personal finance from the workplace, six-out-of-ten staff think that education in the workplace would make them confident with money matters – according to the FSA Consumer Research Report 2004.
- A 2004 Mori survey commissioned by The Institute of Financial Services found that eight-out-of-10 people did not know what annual percentage rate (APR) meant. Some 40% did not understand products such as mortgages and individual savings accounts (Isas).
- When asked to define an Isa for the 2005 Prudential/Citizen’s Advice financial literacy survey, one in ten 18-24 year-olds thought it was an energy drink, while 15% thought it was an Ipod accessory. Over half of adults questioned (57%) did not know how much debt they were in.