How Employers Can Offer Financial Advice

Regulated financial advice is often the missing piece in financial wellbeing strategies. When 41% of employees say financial stress affects their performance at work, employers need to ensure staff can access the right support.

One of the key types of support employers can offer is financial advice. Financial education, money management tools and coaching all play an important role in an employee’s financial wellbeing. However, employees often need personalised, regulated advice to make confident decisions about their pensions, investments and long-term protection, tax and estate planning.

Despite this need, many employers find themselves with a solution that isn’t fit for purpose. This is due to the appointment of a financial advisory firm without adequate due diligence, or the hesitation to offer financial advice because of perceived risk, liability and cost.

This article delves deeper into the topic of financial advice and its benefits, how it differs from guidance and coaching, what employers should look for when appointing a financial advisor and how the government is helping employers provide this service cost effectively through the EIM21803 exemption.

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Key Takeaways

Regulated financial advice plays a crucial role in employee financial wellbeing, particularly when 41% face financial stress impacting work performance.
Financial advice differs from guidance and coaching by offering specific recommendations tailored to individual circumstances.
Employers can provide financial advice through the EIM21803 exemption, allowing up to £500 of tax-free advice annually per employee.
The article highlights the benefits of financial advice for both employees and employers, including increased confidence and better employee retention.
Employers should focus on signposting regulated advisors, implementing clear communication, and prioritising financial coaching for optimal support.

What is financial advice?

In the context of financial services, it’s important to note the difference between advice and guidance. “Advice” is a service that provides a specific recommendation for a financial product or course of action based on an individual’s personal circumstances and goals. “Guidance”, on the other hand, provides information and/or options to narrow down consumers’ choices, without making an explicit recommendation.

Financial advice vs financial coaching

Many reputable financial wellbeing providers will offer financial coaching as part of their service. There are some key differences between these two types of financial experts which employers should keep in mind.

Coaching builds on guidance and financial education by also helping an individual weigh up balanced information and confidently decide what they think is the best course of action for themselves.

It also has a wider scope of focusing on supporting the individual with their skills, actions, emotions, habits and goals to take financial steps and increase confidence and knowledge.

Coaching recognises that being financially confident and competent is not just about having knowledge. Often our own emotions, past experiences, executive functioning and/or other human foibles can get in the way. High quality coaches are specifically trained to work on these aspects of financial wellbeing and to empower people to be able to take control and become masters of their own destiny.

A suitably qualified financial coach (such as a Maji coach) empowers individuals to develop healthy money habits and can explore the personal circumstances of the individual, coach them to plan for future goals and help them create a financial plan, but they can’t make recommendations.

An advisor, in comparison, goes beyond guidance and coaching by providing specific recommendations over actions, products and services tailored to an individual’s circumstances.

You can find a more detailed comparison between coaches and advisors over here.

The benefits of financial advice

Giving employees access to financial advice is one of the most impactful ways to support their financial wellbeing. Before considering the benefits or how it fits into your strategy, it’s important to understand the circumstances that might lead employees to need financial advice.

When might employees need a financial adviser:

Individuals usually need support from a financial advisor when they are not confident about taking a decision themselves and want the added protection of an expert recommending the exact course of action. This would usually be the case in the following common circumstances:

Planning for retirement with significant or complex assets
Seeking recommendations on pension consolidation or investment options
Reviewing or optimising investment strategies that have significant assets (£100K+) invested in them
Evaluating insurance, income protection, or mortgage protection products
Estate planning to maximise legacy

How the employee benefits:

Greater confidence in making complex financial decisions
Reduced financial stress, leading to improved wellbeing
Stronger engagement with their pension and other workplace benefits
Access to regulated expertise, ensuring high-quality recommendations
Protection of the Financial Ombudsman and the FSCS scheme
Up to £500 worth of advice tax-free every year with the EIM21803 the exemption

How the employer benefits:

Better utilisation and ROI of your financial wellbeing programme
Stronger employee retention and engagement
Opportunity to enhance your employer brand as a supportive, responsible business
Potential cost-efficiency when paired with salary sacrifice arrangements

Addressing employer concerns

While regulated financial advice is a highly valuable part of a financial wellbeing strategy, some employers hesitate to offer it due to perceived risks. We frequently hear concerns like:

Liability – “What if the advice is poor? Could we be held responsible?”
Cost – “Can we afford to fund financial advice for everyone?”
Complexity – “How do we manage the process fairly and compliantly?”

Here’s what you need to know:

Liability risk is low: As advisors are FCA regulated, they are liable for the quality of their advice and employees have access to FOS and FSCS schemes if they receive advice that they believe was not in their best interests. If you as the employer signpost to regulated advisers and make the service optional, it is quite unlikely that you can be held responsible for the quality of the advice.
Cost can be controlled: With initial costs of advice between 1 – 2% of assets and ongoing annual fees of 0.5 – 1.5% of assets, advice on just £100,000 of total assets can quickly add up to thousands of pounds every year. Given the open ended nature of the costs, no wonder many employers balk at paying for this service for their employees. However, employers can ask employees to pay for themselves or choose to make a small contribution eg £250/500 towards the cost of advice. Under EIM21803 (details below), employers can contribute up to £500 every year towards financial advice without any tax implications. If an employer does not want to contribute anything, they can also offer the option to their employees to salary sacrifice up to £500 every year towards the cost of advice which will also save the employer NI on the amount sacrificed.
Implementation is straightforward: The scheme can be offered to all employees or to specific groups and frequently might just mean signposting employees to your chosen financial advisor.

What is the EIM21803 exemption?

Financial advice can be a costly benefit to provide employees with, but there is a tax-efficient way to offer it. The EIM21803 exemption, introduced on 6 April 2017 under Section 308C of ITEPA 2003, allows employers to provide up to £500 worth of relevant pensions advice to an employee in a tax year, which is exempt from Income Tax and National Insurance contributions.

This means employers can either pay advisers directly or reimburse staff for eligible advice, as long as the conditions of the exemption are met.

Under this exemption, if an employer provides pensions advice to its employees, or pays or reimburses the costs of pensions advice incurred by the employee, the cost of this advice is exempt from Income Tax up to £500 in a tax year provided all conditions are met.

Normally, if an employer covers this cost without the exemption, the tax authorities treat it as a benefit in kind, and the employee must pay income tax on it. With the exemption in place, the employee does not pay tax on this benefit.

How the EIM21803 exemption works

Here’s how the exemption works in practice, so you can offer advice confidently:

Employers can pay up to £500 per employee per year for advice tax-free.
If in the case the employer exceeds £500 as part of their financial advice benefit, the first £500 is income tax and national insurance free.
Payments can cover both regulated financial advice and financial coaching, including discussions on non-pension topics, as long as the advice or coaching includes guidance related to the employee’s pension as part of the overall conversation.

Conditions and eligibility:

To qualify for the income tax and National Insurance exemption, the arrangement must meet either Condition A or Condition B as set out by HMRC:

Condition A: The scheme is available to all employees generally or to all employees at a specific location.
Condition B: The scheme is available to employees who have reached the minimum qualifying age under the employer’s registered pension scheme or meet the ill-health condition.

5 tips to offer financial advice to employees safely

By following a few simple best practices, employers can provide meaningful support while keeping liability, cost, and compliance under control. Here are five practical tips:

Signpost to regulated advisory firms only
Offer advice opt-in: employees decide whether to participate
Use clear communication templates that don’t appear like you are endorsing your chosen financial advisor only and signpost employees to publicly available advisor directories as well to reduce perceived liability
Track participation without intervening in the advice itself
Work with a provider to help manage the legal aspects like the £500 annual pound limit and keep records of advice sessions for accounting purposes

Ensure compliant, high-quality advice for your employees

Partnering with a financial wellbeing provider like Maji can help employers deliver meaningful support to their employees while keeping the risk and HR administration burden low. Providers can support with:

Access to regulated advice – Employees receive guidance from fully regulated financial experts, ensuring recommendations are compliant and high-quality.
Holistic financial insights – Providers can offer an integrated view of pensions, savings, and other financial products, helping employees understand their overall financial picture.
Contribution management – Providers can handle the legal and administrative requirements of the HMRC EIM21803 exemption and associated P11D reporting, ensuring contributions remain tax-free and compliant.

Not everyone needs an advisor. But everyone can benefit from a coach.

If you’re looking to maximise the impact of your financial advisory offering in your workforce – consider working with a provider who offers financial coaching as well.

While only around 5–10% of employees typically need regulated financial advice, coaching ensures that all employees can benefit from guidance, support, and accountability. Financial coaching also complements financial advice by preparing employees to act on recommendations effectively and sustainably.

By prioritising coaching first, employers ensure their spend on regulated financial advice targets the employees who need it most and delivers real support.

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