When Paul Darquin left the job he held for 35 years, he and his wife, Elaine, decided to get some expert advice about pensions and retirement.
The Darquins wondered whether it was better to keep Paul’s retirement savings in the pension plan offered by his employer, the University of British Columbia, or to pull the money out and invest it. For an answer, they consulted a financial adviser at the financial institution they had dealt with regularly.
The result was a debacle that has cut deeply into their retirement savings and massively increased their debt. “We’re financially devastated from this experience and we have to dig our way out of it now,” Elaine Darquin says.
The Darquins’ experience stands as a warning to Canadians who are weighing their retirement prospects as reliable pensions become an endangered species.
At the same time, the pension crisis presents a huge opportunity for the financial sector to sell advice and products, and the industry knows it. “There’s a greater need for us with less of a pension system – by far,” says Clay Gillespie, a financial planner at Rogers Group Financial in Vancouver.
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But as the Darquins’ travails show, the financial industry may not be ready to provide the kind of advice that people need as opposed to the kind that sells products.
It was in January, 2005, that Mr. Darquin left his job as an audiovisual technician at UBC. While his salary topped out around $45,000, his long years of service helped him amass a sizable pension, valued at $465,394.13.
Mr. Darquin, 62, was prompted to seek advice about his pension after being informed that he had two options upon leaving his job: One was to keep his money in the UBC plan, the other to take it out and invest it elsewhere.
The Darquins’ adviser recommended they invest the pension money as part of a complex plan that included investing borrowed money.
“I didn’t say to him, ‘The UBC pension isn’t enough, what can you do for me that’s better?’“ Mr. Darquin recalls. “Probably the way it worked out was that he asked, if he could do better [than the pension], would that be good? I probably said yes.”
Today, the Darquins have total debts, including a mortgage, of about $150,000, up from about $50,000, and their retirement investments were recently valued at just over $267,000 – a dramatic difference from the value of the UBC pension. To recoup their losses, they’re pursuing legal action against their adviser.
“Part of the problem is that he got us into this complex financial arrangement which was really above and beyond,” says Ms. Darquin, 58. “We’re used to having a credit card and a mortgage.”
The Darquins’ story highlights what investor advocates believe is the central weakness of much of the investment advice offered in Canada. Most financial advisers make their living through commissions on the sale of investments, which means they face a conflict: Whether to recommend what offers the highest compensation or what’s best for the client.
“Most financial advisers have the best interests of their clients at heart,” says Steve Garmaise, associate director at the Canadian Foundation for Advancement of Investor Rights (FAIR). “But despite the best intentions of most advisers, they still face a fundamental conflict of interest in offering true, dispassionate advice to their clients.”
