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As baby boomers approach retirement in greater numbers, more Canadian firms are seeing the benefit of reaching out to offer holistic pre-retirement planning. (istockphoto)
As baby boomers approach retirement in greater numbers, more Canadian firms are seeing the benefit of reaching out to offer holistic pre-retirement planning. (istockphoto)

Pre-retirement

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If you’re a couple of years away from retirement and the bank phones with an invitation to pop into a branch and chat, it’s no coincidence. Like other financial service companies and advisers, it’s gunning for your business.

Targeting this group makes good fiscal sense, says Frank Wiginton, CEO of Employee Financial Education Division in Toronto. In short, pre-retirement investors often have the healthiest portfolios, but don’t always know how to turn savings into a retirement income stream.

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“Those people who are five years from retirement generate the greatest amount of revenue and profitability for financial service companies. That’s why the firms put most of their efforts there,” he says.

Wanted: advice

Janice Farrell Jones, vice-president of retail savings and investing at TD Canada Trust in Toronto, says the bank has indeed been more proactive lately about reaching out to pre-retirees. Not only do branch employees call clients and ask them to come in to the office to discuss their retirement plans, but also, along with TD Wealth Management, it’s offering educational seminars aimed at people a few years out from saying goodbye to the punch-clock.

“We’re hearing more and more from pre-retirees that they’re worried. It’s an age when you’re juggling a lot of priorities and you’re realizing that retirement is not as far off as you thought,” she says.

Morningstar Inc., one of the financial firms in the U.S. offering personalized advice aimed at investors nearing retirement (it does not offer the service in Canada), hopes to gain new business by alleviating the stress that goes along with making sense of pensions, tax-free accounts, government money and ways to beat inflation. Still, the low-cost service is meant only to be a first step toward creating a viable investment solution for retirement.

“In an ideal world, everyone would have their own financial adviser. But, at least in the U.S., most people’s account balances are so small it’s not going to attract the interest of advisers,” admits Alexa Auerbach, a spokesperson for Morningstar in Chicago. “The idea behind advice and managed accounts is that it’s bringing this sort of institutional quality asset management to the masses.”

Al Jones, a certified financial planner and certified life underwriter with A. Jones Wealth & Estate Planning Inc., in Barrie, Ont., says it’s not just the big financial corporations and group benefit companies that look at pre-retirees with interest, though.

“From a planner’s point of view, that’s the demographic you want to be working with. They’re anxious about retirement and what it means. They’re anxious to work with somebody who can coach them and find solutions,” Mr. Jones says.

Transition to retirement

Manulife Financial has also launched a new program aimed at the pre-retirement set. Users can find income calculators, retirement expense calculators, Q&As – and information on how to receive more financial and investment advice from financial advisers.

“Saving and investing is such an incredibly important part of the equation, but as an industry, we’ve got to drive solutions that really help people transition from accumulating their assets to generating a sustainable stream of income,” says Matt Miles, vice-president, product and marketing for Manulife’s Group Benefits and Group Retirement Solutions, in Toronto.

Great-West Life and its subsidiaries are also ramping up efforts by offering a dedicated team of employees who help pre-retirees plan. There are also online financial calculators, videos and interactive tools to try.

A good start. The problem with many programs offered by big firms, however, is that they don’t always seem to give people the personalized advice they actually require, says Harley Lockhart, a certified financial planner with Quail Ridge Financial Services in Kelowna, B.C.

Many group programs geared toward company employees, for example, are there to explain the options offered – registered retirement savings plans, insurance or pensions – but not the best way to use them to build wealth. Yet that second part of the equation is vital.

“What good does it do somebody to have a very complex computer if they don’t know how to turn it on?” Mr. Lockhart asks.

Where’s the information coming from?

Then there’s the issue of bias. According to Mr. Wiginton, the majority of financial services companies that do provide advice, slant it toward their own products, rather than offering a comprehensive view.

“That might be fine, but let’s face it, sometimes there are other things that should be talked about but aren’t being talked about,” he says.

Independent financial and investor education in the workplace is a tougher sell in Canada compared with the United States – Mr. Wiginton says that the more litigious environment in the United States spurs employers to offer it to cover their bases.

Yet as boomers age and approach retirement in greater numbers, more Canadian firms could see the necessity of offering holistic pre-retirement planning. Surveys and studies over the years have pointed out that money concerns top the list of what stresses out employees most. That financial stress can take an incredible toll on the workplace. Think increased absenteeism, higher turnover and drops in productivity. After all, it’s harder to stay focused on the job when you’re either worried about paying off a mountain of debt or saving enough for an impending retirement.

“Companies are offering mindfulness training, fitness and yoga classes. But if you take a step back, what is causing the stress?” Mr. Wiginton asks. “Financial education programs in the workplace aren’t the solution, but they have to be part of the solution.”

When to start thinking about retirement planning

According to Mr. Jones, a certified financial planner, too many employers offer retirement planning programs too late: only one or two years before that big party and gold watch. Instead, investors should start planning five years before the big day.

“I call it ‘five to go,’” he says. “Some bigger companies start talking about it one year out, but from a financial planning point of view, that’s inappropriate.” 

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