RANDS & SENSE
DAWIE DE VILLIERS
THE employee benefit industry is fragmented and non-inclusive, with advice being more accessible for high-income earners and benefits not integrated into our overall financial well-being. Therefore, we need to adopt a collaborative approach, as Isaac Ramputa, chief executive at the Financial Sector Charter Council, articulates: “A one-size-fits-all solution is not the right approach to structuring employee benefits; we need to consider the unique characteristics of the South African demographic profile. From (Alexander Forbes’s) Benefits Barometer we have learnt that our focus needs to be on the financial well-being journey of employees, with the end-goal of saving for retirement.”
Against this background, I believe the true impact of our Benefits Barometer publications is in the changes they have sparked in defining both the narrative of the South African financial services industry and in advice and solutions. However, it is now time for action to embed this fully and deliver the desired outcomes.
The following six catalysts of change have driven significant shifts in advice frameworks, services and solutions:
1. Shifting from one size fits all to personalisation This takes place not only in the solutions, but also in how advice frameworks are designed. Take, for example, retirement investment strategies. There has been a significant enhancement on the traditional approach where only an individual’s age was considered as an input, to an approach where strategies are tailored to individuals based on multiple inputs. In general, a more personalised, data-driven approach focusing on individuals’ income goals and their behaviours needs to be followed in designing an employee benefit programme; this better supports the outcomes envisaged by regulations with an advice-led approach. To comprehensively structure an employee benefit programme, we have recommended an approach that analyses retirement, health-care and indebtedness profiles to aid employers in putting proactive measures in place to address the specific issues relating to their employees.
2. Leveraging workplace employee benefit schemes Employers have vested interests in improving the financial well-being of their employees. Some benefits include the ability to provide employees with group pricing on insurance and savings options, as well as workplace benefit counselling to assist individuals on, for example, joining, leaving or retiring. We believe that the most important way to change the saving and financial planning behaviours of South Africans is to work with them the moment they start earning an income.
It is better to start an advice framework before an employee even signs a contract and then use ongoing engagement to help them with their financial decisions both throughout their employment history and beyond.
3. Embracing goals-based frameworks and solutions For example, to achieve a good retirement outcome, our advisory framework needs to be goals-based, by reviewing individuals’ needs and goals and evaluating how shortfalls can be addressed both in programme design and implementation. Measurement tools need to determine the success of strategies, and retirement and nonretirement savings need to take place side by side.
4. Understandable, relatable and actionable information A key requirement is that information must be understandable, relatable and actionable. Easily understood and easily accessible information provided and presented in a relatable way results in more individuals making more informed choices. To deliver this, we have initiated an innovative digital engagement programme, to provide human resources practitioners with support during individuals’ life journey with the company.
5. Integrated advice and solutions The single biggest impact we have is to shape how the industry operates
RSA RETAIL BONDS: AUGUST 2019