Pension decisions shouldn’t be made in a vacuum. For plan members to make the best decision they have to understand more than just the details of their pension options; they have to understand how each option can impact their financial future and retirement plans.
This is what led the Ontario Pension Board to transform its service delivery model in 2014 from a traditional model to an advisory services model. The traditional model focuses solely on providing plan members with general benefit information and transaction support, placing the burden of critical decisions on the plan member. The problem with this model is that it assumes members have the necessary pension and financial literacy to make these decisions, but the reality is most do not.
Pension issues are complex and making a wrong decision or even a less than ideal one can significantly impact an individual’s financial future. We launched advisory services because we want to ensure our plan members have the support they need to make sound decisions about their pension in the context of their personal financial and life circumstances.
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To deliver advisory services, we had to become more than pension experts. We had to build internal financial planning expertise and develop sophisticated online tools within a service delivery model that’s structured to provide both transaction and decision support. Our new model has four key pillars:
1. Triage. Our Client Care Centre is the first point of contact for plan members. They don’t always know what to ask for when they need help, which makes it critical to have a frontline team that can discern when a plan member simply needs general information or transactional support and when they need decision support from a client service advisor. To do this effectively requires staff with pension expertise, strong communication skills and a broad understanding of retirement planning issues. Both plan expertise and the broad retirement planning expertise (provided by the registered retirement consultant designation) are requirements for this role.
2. Transaction support. Helping plan members “close the deal” when an election is made to complete the transaction.
3. Advisory tools. We’ve introduced sophisticated online tools to help members take a more active role in their retirement planning with the ultimate aim being to draw them back to us for important advisory discussions. These tools help plan members gain a better understanding of their retirement picture allowing for a more meaningful conversation with our advisors.
4. Decision support. To help plan members make the best decisions about their pension given their personal circumstances and goals, we created a new client service advisor role that combines pension expertise with a certified financial planner designation. These advisors help plan members navigate pension decisions by helping them understand how each option affects their entitlement in our plan and their overall financial situation. To do this our advisors meet with members to understand their life, family and financial circumstances, all of which can impact which decision best positions the plan member to meet their financial and retirement goals.
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For example, we’ve seen many cases where plan members who are terminating their membership before they retire struggle with how to leave a legacy for their adult children. Frequently their financial planners and/or family, recommend taking the commuted value out of the plan. While taking the commuted value out of the plan can sometimes be the right decision for a member, it isn’t the only way to leave a legacy for adult children. Term insurance is another relatively inexpensive option that can meet their objective without risking their guaranteed lifetime pension. This is the value our advisors can bring into each meeting with a plan member.
As plan administrators, we’re in the best position to deliver unbiased support to help plan members make well-informed decisions about their pension. We not only have the expertise but we’re also the only ones without a personal stake in the member’s decision.
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The industry tends to focus on the risks associated with providing advice to plan members, but we believe the risk of not providing guidance and counsel is actually much higher and the case law supports this belief. The reality is that most members simply don’t have the expertise to make sound pension decisions. Also, under the traditional model, it often felt as if we were just standing by and watching members make poor decisions without helping them understand how that decision could impact their future financial security. This is what drove us to implement an advisory services model.
Another significant difference with our service delivery model is that it’s not focused on speed but on providing quality counsel and making sure the plan member understands their options and how those options can impact their financial security in retirement. We believe this is imperative in order to help our members avoid costly mistakes that could negatively impact their retirement security.
The evolution to advisory services was not simple. We spent years developing this model to ensure we were ready. We’re thrilled with the buy-in we received from all of our key stakeholders ahead of its launch. We’re also very pleased with how well it’s been received by our plan members and how many of them are taking advantage of the service. Since our launch we’ve been able to help thousands of members navigate key pension decisions within the context of their broader financial circumstances.
Peter Shena is executive vice-president and chief pension officer at the Ontario Pension Board.