This is part of Morningstar's special series on the Retail Distribution Review (RDR).
The focus of the Retail Distribution Review has been very much on advisers and how they can change the way they train for and deliver financial advice. But the government has also been making regulatory changes that increasingly put the onus on the individual and the employer to get people taking charge of their own financial future.
I recently spoke to Fred Brown, managing director of Last Exit, a digital agency with offices in London and New York, to hear more about his creative way of getting staff engaged in investing for the future.
“I wanted to get ahead of RDR and auto-enrolment and make [contributing to] a company pension part of the company ethos,” Brown says. With the help of his IFA, Brown eventually deciphered the jargon of the pension providers but the next challenge was getting the buy-in of the company staff. Brown decided to embark on a creative scheme to get his staff thinking seriously about their financial future and encourage them to do something about it. “I’ve always believed in pensions and I started mine relatively early. It’s sensible to invest for future retirement but complexity and pressure on income mean it’s all too easy to put it off,” Brown notes.
Brown held a presentation for his London staff entitled “Unqualified Advice You Should Ignore” during which he described his own investing history, and with the help of his IFA explained the basics of long-term investing, risk-profiling and the cost of doing nothing. Together they told the team: “If you want to retire on a graduate salary—a salary of £20k per year—you need to save about X.” This illustration went some way to waking his staff up to the severity of the situation. But a little more persuasion also came in handy. He ran a competition with a cash incentive, in which members of staff could pick any fund and save that fund in a portfolio on Morningstar.co.uk. “I promised a £1,000 prize to be paid into that fund for the portfolio that performed the best over six months…not a sensible timeframe for real-life investing, but the purpose was to make people think about the choice they would make,” Brown says.
So did this creative approach work? “I got graphic designers talking about pension funds!” Brown laughs. Of the 30 employees in the London office, all but two now pay into pensions even if they’re not yet eligible for the company pension. “In a creative company, where people are relatively young and there’s lots of things they could be spending their money on that would give them instant gratification, I’ve managed to excite all but two of them into taking the jump,” Brown says. “I consider that a great result,” he adds.
Brown’s IFA, who helped him decipher the pensions landscape and excite his team about long-term investing, is now the “friendly uncle of the company”, hosting a monthly surgery to answer staff questions.
Does Brown have any tips for others in his situation? “It’s got to be fun,” he says, “ignore finance and focus on the real things: where do you want to be when you retire?” Brown explains that individuals need to be made to imagine the type of house they want in retirement, the country of retirement, the car, the restaurants and the holidays; create that picture and then work back to get to a situation where one can say: “to achieve this sort of life style, I need to save roughly X.”
“We need a Jamie Oliver of pensions who can spearhead this cause,” Brown muses. Jamie’s doing it for school dinners, Vinnie Jones is doing it for First Aid…could Fred Brown do it for retirement saving?
