Advising on group assets pays off in the end

Most advisors will tell you that they want what’s best for the client; but they also want to get paid for their work. That can pose a problem for clients who need help choosing off-book assets such as a defined contribution plan or a group RRSP.

“At the end of the day you’re running a business,” says Jeremy Racicot, a CFP with Burlington-based The Bay West Group. He knows that he’s not making money off the advice he gives his clients about their DC plans, but unlike an advisor who won’t advise on non-commission producing assets, he is willing to help. But only for client’s he says are “100% fully engaged.”

Racicot is willing to go through a client’s employer’s documents or website to see what they have to offer. “We just get them to pull up the website, login, get the fund lineup and e-mail it to us,” he says.

There are a couple of reasons why he’s willing to help. The first is that he knows his clients best, and helping them find the right product will benefit their overall financial plan. The second is that when that client retires, those assets will likely come to him.

“We get paid through the money we manage on an individual basis,” he says. “One day, when they retire, they’ll have to peel that DC plan into a locked retirement account and we’ll have somewhere to go with it.”

That relationship building is hard work, which can make this type of advice an even bigger turnoff for advisors. He says most advisors work with funds and companies they know—DC plans can offer a whole different swath of options. “When someone comes to me it does take a lot more work because I have to familiarize myself with funds I may not have seen before,” he says.

A client may have to give the advisor permission to access plan information. Claude Leblanc, senior-vice president of group savings and retirement at Standard Life, says that advisors should get access if they want to create a comprehensive plan for their client. “If the client has some years to work, this could be quite a substantial part of the assets when considering full retirement planning,” he says.

When it comes to one specific client, helping out pro bono until they remove their assets from the plan and invest with you is about as far as you can go. However, advisors may want to make working with insurance companies and plan sponsors part of their business.

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Bruce Moir, senior manager of product and services at ScotiaMcLeod says his advisors work with plan sponsors to develop DC options and then the company can choose to place their business with the bank. ScotiaMcLeod has been doing this for years, but any advisor could approach a company and offer their services.

A good first step is to connect with an existing client who has a position of influence in a company. “Maybe the advisor knows the head of HR or a CFO who says ‘we need to look at our group plan, can you help me?'” says Moir. “Some advisors are more proactive in calling clients and saying they’d like to get into that business.”

Advisors at ScotiaMcleod usually go through the KYC process with employees and talk to plan members about their options. “It’s a hands-on approach,” says Moir, adding that they work in teams rather than one advisor servicing hundreds of clients.

Leblanc says it helps if an advisor understands what it’s like to work in a group RRSP context, especially if they’re helping design a plan. They have to know something about corporate budgeting costs, liabilities, compliance and the ins and outs of that particular company.

“They have to build the right design in a corporate context and develop a plan that would help make the company competitive in the work force,” he says.

If you want to work with group plans, getting experience and then developing a good sales pitch is a good option. What an advisor shouldn’t do is call a client’s employer and say they want to get involved on behalf of their client.

“Almost 100% of the time an employer would say no,” says Moir. “The integrity of the plan has to remain with the plan sponsor. You can’t have 25 different people giving advice.”

Moir points out advisors must document any off-book advice they give a client, because talking to clients about off-book assets is generally frowned upon by regulators. An IIROC spokesperson says it could be crossing a line, though every situation is different. It’s probably best, says IIROC, to not get involved with assets that aren’t on your books.

Of course, it’s hard to tell a client you can’t talk about something when their overall financial wellbeing is at stake. Racicot only advises on what he’s allowed to talk about—he’s not securities-licensed so he can’t offer stock suggestions.

What he can talk about is retirement planning, which he does to group RRSP members. It’s another way to get involved in the space in a more serious way. About 40 times a year a broker Racicot knows gets him to hold an informal pre-retirement planning seminar. He offers advice to plan members on how to transition from the working world into their golden years. While he doesn’t get paid for the seminars, he does get about eight new prospects each session.

Racicot says it’s a win-win for him, the company and the broker. “The broker is good at building plans and rolling them out, I’m better at building a retirement plan and the employer is happy because it’s adding value,” he says.

Anyone can hold a seminar, but Racicot says it’s better to align yourself with a group benefits consultant. “Otherwise it’s just mass marketing,” he says.

However you do it, the consensus is that helping clients with their DC plan is a wise move. It won’t make you money in the short-term, but it could pay off down the road.

“The advisor may not benefit today, but the client will need help and there’s potential to make money,” says Moir. “Most advisors should carry that long-term view.”