Top 5 Practices for Group Retirement

Authored By: Advisors Forum-GRS Roundtable | Publish Date: December 18, 2017

1. Governance first, next, always
Be loud and be proud of what you do to follow the rules according to the Capital Accumulation Plan (CAP) guidelines, and that includes spelling out the benefits for clients. While governance may not be the most exciting topic, don’t underestimate the positive impression it can make. “Time and again I meet with a potential client, ask some questions about how they manage their plan and they’ll stop me and ask, ‘What are you talking about? What’s governance?’ That’s an easy way in for me, but it’s also a warning bell that advisors are not taking governance seriously enough,” says Wayne Farrow, Partner of Farrow Pension & Benefits in St. Catharines, Ontario. Advisors need to invest the time and resources to develop and adhere to their internal  governance process. “We have implemented what we call a CAP governance document, which is tailored for the client and signed off by the client and the advisor. It lays out the client’s role and responsibilities, employees’ rights and responsibilities and the roles and responsibilities of the advisor and provider. We also disclose how often funds are reviewed, and how advisors are reviewed and compensated,” says Tony Conte, President of Conte Financial Services in Ottawa, Ontario. “It lays out everything we need to move forward and it works very, very well. It solidifies our relationship right from the very beginning.”
During meetings with clients, take minutes, summarize action items and use the governance document or checklist as a compass to guide decisions, adds Farrow.
Annual reviews are an important part of governance, and an opportunity for advisors to add value by providing concise analysis. “We don’t simply pass along the carrier’s report. We utilize core plan statistics from the carrier and provide independent analysis based on CAP guidelines to ensure effective stewardship,” says David Holm, Partner at ONYX Financial Group in Winnipeg, Manitoba.
These summary reports can also prove invaluable during audits, adds Holm. “A number of our clients have undergone pension administrative reviews and they included our reports with cover letters that identified action items, etc. They got great marks for their approach, with positive feedback from the regulator.”

2. Do what you do best, facilitate the rest
Among smaller employers, group retirement savings plans appear to be a distant cousin to group benefits: while three out of four have benefit plans in place, fewer than one in seven (14%) have retirement plans, according to Statistics Canada.1 “Retirement is often an afterthought for groups of that size. The focus is primarily on benefits, and they are serviced that way too,” observes David Frank, Employee Benefits and Group Retirement Advisor at Bell Financial in Aurora, Ontario. “In many cases I think it’s because many advisors aren’t comfortable promoting and servicing group retirement plans. As a result, employers may assume that advisor expertise in group retirement is not strong.”
Whether you’re a sole practitioner or part of an advisory firm with multiple divisions for benefits, retirement, life insurance and possibly wealth management, an internal infrastructure is required to facilitate the provision of expert  advisors. “We discuss clients’ needs in team meetings. If one of our group benefits people wants to bring me in, then we make that happen and I am presented as the expert in retirement,”  says Cristina Ramirez, Retirement Account Manager at Penmore Financial Group in Concord, Ontario.
Solo advisors, meanwhile, would draw upon a network of trusted external partners who can step up to the plate when called upon.
In either scenario, Ramirez recommends that clients’ needs be met one service at a time. Once group benefits are set up, for example, then retirement planning can become the focus. In the long run this is a more efficient use of clients’ time and leads to better decision making.
It probably goes without saying that once an infrastructure is in place, each meeting becomes an opportunity to briefly remind clients of the other services available. To encourage uptake, offer a lower compensation scale when clients sign on for both benefits and retirement. It may still take years to put everything in place, but at least clients know you are their one-stop,
expert shop.

3. Engage employees, win employers
Advisors who go the extra mile when it comes to employee-level communications are sure to generate client loyalty. “Employers say they can’t lose me now because their employees really need me,” says Conte, who developed a series of seminars for employees that go into detail on the different stages of retirement planning. “Those seminars keep me busy, and they’ve really increased our asset base.”
Providing access to personal financial planners (sourced internally or through external partnerships) is another option to boost employee engagement. Introduce them at employee meetings and make sure there is a reliable system for one-on one follow-up appointments. “They can do an incredible job getting employees pumped up about their plan and what it means to them personally,” says Holm. “I’ve had plan sponsors call to thank me, because they’ve had employees thanking them.”
Employers may also be receptive to the financial planner meeting with employees on site. “We will provide an employee sign-up sheet for the plan administrator, and this usually results in at least a handful of appointments on the day. Most of my business is with small groups, and they’re just not used to that level of service. They often say they don’t know how we can do it, but from my perspective I don’t know how we can’t do it,” says Frank.
Indeed, such one-on-one service tends to be a unique value proposition for smaller groups since larger employers find it harder to execute due to multiple locations and the costs charged by larger benefits consulting firms.
Just one important caveat when it comes to personal financial planning: be sure that employees sign a waiver before their first appointment, as part of governance to indemnify the  employer. “Employees need to understand that they are taking advice and if they choose to take action, it is their decision. Their employer has nothing to do with it,” says Conte.

4. Contributions are the thing
When you do the math, employee contributions are the most important factor when it comes to group retirement plans. Advisors who focus on that when it comes to engaging employees will set themselves apart. “One of the most important value adds we could offer plan sponsors would be to better engage employees in the voluntary contribution area. We need to be measuring voluntary contributions, year after year, and presenting the results to the plan sponsor,” says Frank.
During the group employee meetings, use compelling slides or providers’ online retirement calculators to illustrate the impact of higher contribution levels. The online calculators can be especially impactful when you input scenarios suggested by employees in the room. “You can really see the understanding dawn on people’s faces. In one case we used this information during enrollment sessions with over 150 employees, which led to an uptake of over 85% on a voluntary plan,” says Tyson Glassier, Operations Manager at The Benefits Company in London, Ontario.
Plan design is also part of the contributions equation. Roundtable participants agree that increasing the maximum amount matched while decreasing the percentage of matching (e.g., matching at 50% rather than dollar for dollar) effectively encourages plan members to contribute more.

5. Ask the right (tough) questions
When it comes to new business, include companies that already have retirement programs in place. Then don’t shy away from asking the types of questions that may cause plan sponsors to question the value they’re getting from current advisors. “We ask prospects to do a quick quiz that asks things like, ‘Are you aware of the impact of your advisor’s compensation on investment management fees and how this may impact the plan member’s final pension? When is the last time you did a governance review?’ They get a score, and if it’s a bad score we  suggest they give us a call,” says Farrow.
The quiz or questionnaire can be online or via email—and old-fashioned “snail mail” can make an impact in today’s electronic age, especially if stands out from the rest. For example, the envelope can contain a small calculator and the message, ‘Have you calculated the cost of what your advisor is charging you?’
Roundtable participants agree that support staff or an outside firm should cast the original net to potential clients, to make best use of the advisor’s time. “Once we get a response I call them. It is working,” says Ramirez, who uses an outside firm.
Fund shelf development
Less is definitely more when it comes to fund offerings under a CAP, as a way to reduce the risk of confusion— and inaction—among plan members. Providers have streamlined the size of their fund shelf to between 10 to 20 funds, compared to upwards of 50 funds just 10 years ago.
For the small number of clients with plan members who insist on greater fund selection,  advisors can show value by rationalizing the list over time. “Look at how the funds are really being used and then peel away everything else. Otherwise this could be a nightmare for plan sponsors, who are responsible for due diligence on all the funds,” says Holm.
The target date fund is also more likely to be designated as the default. Data from Great-West Life indicate that 50% of defined contribution plans and 51% of group RRSPs in 2016 used target date as their default, up from 43% and 44%, respectively, in 2015. And when it comes to new sales, 90% of CAPs use target date as their default. In Alberta and B.C., the regulatory bodies for employment pension plans now mandate that either target date or balanced funds are to be set as the default.
Technology, at your service
Social media and mobile apps continue to change the way consumers behave and make decisions—and financial technology continues to evolve in response, to be better aligned with plan members’ service expectations.
Ironically, most plan providers already offer online tools to members, and have done so for years, but uptake has been disappointing to date. That’s expected to change with the latest offerings, which provide more of a turnkey, real-time experience that securely accomplishes tasks online (or by smartphone), without any cumbersome paperwork. Great-West Life, for example, has been piloting its Wayfinder system, which has so far seen almost 20% of invited plan members take decisive action such as increasing their contributions or transferring assets. The system can aggregate retirement savings from multiple sources so that all assets come into play when calculating retirement income, and users can book an online chat, a video  conference or a phone call with a trained coach if they need more direct support.
As these systems become more available, advisors can focus more of their energies on engaging plan members to begin with. They can also walk them through these new technology offerings, as an option to translate decisions into actions.
Decumulation hitting stride
In the next 10 to 15 years, baby boomers in Canada are expected to draw trillions of dollars out of the retirement savings system. What’s a plan sponsor to do?
Roundtable participants agree their clients are generally split: about half want to offer a decumulation process for their retirees, and half want their responsibilities to end with retirement. Smaller groups in particular are more likely to opt for the latter route, since options such as group LIFs/RIFs are not available to them (at least not yet).
Either way, plan sponsors may be under increasing pressure to educate older employees about what lies ahead. “More employers are saying that one employee meeting per year is not  enough and are starting to see the value of offering different meetings for different age groups. Certainly among older employees, their focus is much more on what needs to happen to create  a retirement income,” says Frank.
“When they have just five to 10 years to go, they have so many more questions,” agrees Holm, whose firm has offered separate meetings for years, with “incredible” attendance rates.


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