With the likelihood of longer retirements and less access to corporate defined-benefit pension plans, professional retirement planning is proving to be an important service for Canadians, according to Peter Drake, vice president of retirement and economic research with Fidelity Investments Canada ULC in Toronto.
In fact, the 2015 Fidelity Retirement Survey indicates that retirement planning and retirement income planning is the most valued service for retirees and pre-retirees, with 67% of survey participants stating they would appreciate this service from their financial advisors. However, fewer survey participants, 61%, believe advisors actually offer this service.
“There was a time and we’re talking quite a while ago, where you went to a financial advisor primarily to find out how to invest,” Drake says. “I think some advisors still feel that’s what they should be doing. But, over time, clients have looked for other things.”
This need for additional guidance in retirement planning is a result of changing circumstances surrounding retirement, such as the increasing popularity of defined-contribution plans, and presents an opportunity for advisors, Drake adds.
“That’s the place where, ideally, individuals will get some advice because with a defined-contribution plan, [the investor] has to make more decisions [regarding investments],” he says.
The Fidelity survey also found that only 37% of respondents who have an advisor also have a written retirement income plan, which is “shockingly low,” Drake points out.
“The reason the number is low is you’re dealing with a very basic human condition where stuff happening today is much easier to focus on than what’s going to happen 20 or 25 years down the road,” he says.
However, younger clients who feel it may be too early to start planning for retirement — especially because their circumstances could change down the line — should be encouraged to start this process. That’s because having a retirement plan makes it much easier to adapt to any changes in the investor’s life or on the financial markets, Drake says.
Another potential opportunity for advisors lies in the area of health-care planning. Clients could use help in this area as 30% of health-care funding generally comes out of pocket — whether the individual pays for it directly or it’s covered through insurance, Drake says.
Although only 16% of survey participants say they’re seeking this service, only 12% believe advisors offer health-care planning.
Thus, advisors should consider sitting down with clients and leading them through a discussion of how finances would be handled if an unexpected health-care cost popped up, Drake suggests. Advisors can also try to become familiar with local resources, such as community care access centres, to which clients can be referred should they need more help regarding care for health issues.
Estate planning is another area in which there was some discrepancy between what survey participants want and what they think advisors provide, with 26% looking for help with this topic but 22% believing this is a service advisors provide.
Other planning topics were more popular with investors but they are also more familiar with whether advisors provide those services. For example, tax planning followed retirement planning as the second most valued service for 36% of survey participants, with 37% believing advisors provide this type of guidance. The third most popular option was “other savings goals” with 36% of respondents valuing this type of advice and 45% saying that advisors provide this service.
The Strategic Counsel conducted the survey on 1,392 Canadians who were 45 years of age and older between Oct. 22, 2014 and Nov. 3, 2014 on behalf of Fidelity.