Manulife research shows one in three workers are struggling with their finances. So should plan sponsors offer access to professional advisors to help?
To date, there’s been a level of fear around getting involved in investment advice—and the potential liability associated with it. “Plan sponsor perception of risk around providing advice has been very high,” said Simon Chan, assistant vice-president, product, group benefits & retirement solutions with Manulife, speaking this morning at Benefits Canada’s Benefits & Pension Summit.
But interest in offering access to advice is growing in Canada. In a 2014 Manulife survey, 80% of plan sponsors said they’d be interested in providing some type of investment advice to their members.
Improving the financial wellness of employees can actually benefit employers, too, Chan explained. “There’s a strong link between how financially prepared plan members feel and how healthy, engaged and productive they are.”
And Manulife health and wealth research finds people who were more financially prepared were five times more likely to be working with a financial advisor. “So there is empirical evidence that shows there is some value to advice,” he added.
Is education enough?
Despite the considerable resources spent on educating DC plan members, there are some you just won’t be able to reach with it, said James Clark, president of Dunhelm Consulting. “They’re too frightened of arriving at retirement and finding they’ve made a mistake.”
If a plan sponsor chooses to go beyond education and enter the realm of advice, how it offers that advice has an impact. From a fiduciary duty standpoint, there’s a difference between being involved and being committed, noted Clark. “If you’re going to give people investment advice, you’d better make sure they’re committed to the process.”
Compensation has to be part of the discussion. Advisors can be paid through salary and bonus, trail fees and commissions or an asset-based fee. But ultimately, “I don’t think it really matters how advisors are paid,” said Clark. “Transparency is what matters.”
What’s the key to a successful advisory relationship? Alignment of interests between the member and the advisor so that if one does well, the other does well, Clark explained, adding,”it’s a fair relationship.”
All the articles from the event can be found in our special section: 2015 Benefits & Pension Summit Coverage.
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