Review of banks’ retirement planning provides insights for advisors

Among the Big Five, RBC received the top score, while National Bank had the top ranking among the other institutions. But the study offers insights for all advisors, regardless of where they work.

Can I have an hour of your time?

The most highly rated banks in the study were the ones where advisors spent the most time assessing clients’ situations.

Nearly half (46%) the meetings observed in the study were 45 to 60 minutes long, and almost one-fifth (17%) were more than 60 minutes. The hour-long meetings were well-received by clients, who described them as “thorough” and “complete,” the study said. Clients never complained that advisors who held long meetings were verbose or wasted time.

Clients who experienced meetings of fewer than 30 minutes all said not enough time was spent asking about their situations. On the positive side, less than one-tenth of meetings fell within this short timeframe.

National Bank had more long meetings than any other financial institution: 40% of its client meetings in the study exceeded one hour, and all meetings were longer than 30 minutes. In contrast, one in five meetings at TD were less than 30 minutes.

The study also noted that advisors who took the most time with clients were more likely to receive client recommendations, based on the study’s net promoter scores.

Topics to discuss

The best conversations with pre-retirees (as rated by participants) covered a wide range of important retirement topics, including debt and budgeting, retirement lifestyle, income sources, time until retirement, savings and pensions. Advisors who thoroughly covered these topics scored best on metrics such as whether they were perceived as retirement experts.

The study identified some less-discussed topics that potentially represent opportunities for deepening client relationships. These were tax efficiency, estate planning and gifting.

Advisors do clients a disservice when they prioritize discussions about products at the expense of doing a deep dive to uncover retirement needs, the study found. In such cases, “Clients may feel that the experience is one that is transactional in nature rather than one where the retirement planner is their financial coach,” it said.

When discussing products and solutions, the study found that advisors ignored ETFs, despite their growing popularity among investors. Among the Big Five banks, ETFs were discussed at only 6% of meetings. In contrast, mutual funds were discussed 68% of the time (a high of 87% at Scotiabank, and a low of 50% at CIBC).

TFSAs and RRSPs were discussed at 81% and 80% of meetings, respectively.

Fees were brought up at only 68% of the meetings — something the study warned against. “In this time of increasing low-fee options and robo advice, the benefits of bespoke financial advice is worth stressing,” it said.

Ease fears and instil confidence with planning

Advisors’ ability to ease retirement fears was one of the lowest rated areas in the study. Yet, fears must be addressed and eased, the study said, because clients near retirement age can feel anxious, especially if they have financial shortfalls.

To better ease client fears, advisors can offer honest reassurance (e.g., explain how the client is on track with their savings, if that’s the case), prepare a plan and suggest alternatives to any shortfalls (e.g., boost RRSP contributions, rent out a basement suite), the study said.

Regarding retirement plans, 82% of clients were promised one — an outcome the study described as “encouraging.” RBC and National Bank led the way, with almost all clients promised a plan. The remaining clients (18%) were largely told they could receive a plan once they transferred assets to the bank.

The study found a clear difference in how clients rated meetings with advisors who had Certified Financial Planner (CFP) or Personal Financial Planner (PFP) designations versus non-designated advisors. (It focused on these two designations because they’re the most popular in retail banking, it said.)

For example, when net promoter scores between advisors with the CFP or PFP designation and those without designations were examined, the percentage of promoters and detractors swayed meaningfully toward having the designation.

Clients also rated those with designations higher on metrics such as “easy to talk to,” “considered a retirement expert” and “prepared for appointment.”

The study attributed the higher ratings to the expertise and experience of the designated advisors, which contributed to easing retirement fears, making conversation easier, demonstrating knowledge and showing improved preparedness for retirement conversations. Designations also instil trust with clients, it said.

DALBAR’s full rankings from the study are as follows:

Big Five banks:

1. RBC
2. Scotiabank
3. CIBC
4. BMO
5. TD

Other institutions:

1. National Bank
2. Desjardins
3. ATB
4. Vancity
5. HSBC

About the study: DALBAR’s 2020 retirement study used a two-prong approach. First, 1,800 Canadians were polled about retirement topics most important to them. Second, the results were used to develop a study of Canadians with fewer than 10 years until retirement. The study analyzed 192 in-person retirement meetings at banks and other financial institutions. Almost three-quarters of those in the study (74%) had portfolios of over $100,000. Rankings and overall scores were determined from a weighted composite that included client perception and objective metrics.