Ad­vi­sors are not happy about changes to their pen­sion plans.

Ad­vi­sors have high ex­pec­ta­tions of their banks’ pen­sion plans, but many be­moaned the changes their firms have im­ple­mented

Investment Executive - - FRONT PAGE - BY SO­PHIE ALLEN-BAR­RON

un­like fi­nan­cial ad­vi­sors in the bro­ker­age and mu­tual fund dealer dis­tri­bu­tion chan­nels, who have the op­por­tu­nity to sell their books of busi­ness to fund their re­tire­ment, ad­vi­sors who work at Canada’s banks rely largely on their bank’s pen­sion plan to pro­vide a com­fort­able re­tire­ment.

Thus, banks that can pro­vide a solid in­come dur­ing these ad­vi­sors’ golden years al­le­vi­ate much worry — es­pe­cially for ad­vi­sors who are ap­proach­ing re­tire­ment. No sur­prise, then, that ad­vi­sors gave the “firm’s suc­ces­sion/re­tire­ment pro­gram for ad­vi­sors” cat­e­gory an over­all av­er­age im­por­tance rat­ing of 9.2.

How­ever, ad­vi­sors gave an over­all av­er­age per­for­mance rat­ing of only 7.9 in this cat­e­gory. This 1.3-point dif­fer­ence be­tween these two rat­ings re­sulted in a “sat­is­fac­tion gap” that’s in a three­way tie for fourth-high­est in this year’s Re­port Card on Banks.

This dis­sat­is­fac­tion stems from what ad­vi­sors view as a three­p­ronged prob­lem: low pen­sion pay­ments; changes to the way their pen­sions are paid out; and the con­tin­ued move to­ward de­fined-con­tri­bu­tion (DC) pen­sion plans and away from the more pop­u­lar de­fined-ben­e­fit (DB) pen­sion plans.

Mon­treal-based Na­tional Bank of Canada, which kept its DB pen­sion plan in­tact, was rec­og­nized for do­ing so: the bank’s ad­vi­sors gave it the sec­ond-high­est per­for­mance rat­ing in the cat­e­gory, at 8.3.

“[Our pen­sion plan] re­ally is one of the best,” says a Na­tional Bank ad­vi­sor in Que­bec. “We’re one of the only banks that still have a de­fined-ben­e­fit pro­gram.”

In other cir­cum­stances, how ad­vi­sors view their pen­sion plan de­pends a great deal on their level of ex­pe­ri­ence and which type of pen­sion plan they have. For ex­am­ple, Toronto-based Royal Bank of Canada (RBC) in­tro­duced a DC plan for new hires about five years ago. But, be­cause the RBC ad­vi­sors sur­veyed for this year’s Re­port Card had the sec­ond-long­est ten­ure with their bank in the sur­vey, at 14.1 years, many pointed to their DB plan as rea­son for their sat­is­fac­tion. (RBC re­ceived the high­est rat­ing in the cat­e­gory, at 8.5)

“I’m a mem­ber of the de­fined­ben­e­fit plan — and it’s one of the best that I know of. It’s over- funded and well man­aged,” says an RBC ad­vi­sor in Al­berta.

Ad­vi­sors’ per­cep­tion of their pen­sion plan was more mixed at banks at which there were ex­pe­ri­enced ad­vi­sors who are on the bank’s grand­fa­thered DB plan and oth­ers who are on the newer DC plans.

This di­chotomy was quite ev­i­dent at Toronto-based Bank of Mon­treal (BMO). Its 8.0 rat­ing in the cat­e­gory was tied for third­high­est with Toronto-based Cana­dian Im­pe­rial Bank of Com­merce’s (CIBC) rank­ing even though the BMO ad­vi­sors sur­veyed had the short­est ten­ure at their bank, at 8.1 years.

“There’s not a lot of banks that have DB plans any­more, so we’re lucky to have it,” says a BMO ad­vi­sor in On­tario.

On the flip side, a col­league in the same prov­ince says the pen­sion plan “is not as good as be­fore. They don’t of­fer DB to the new hires any­more. I’m not part of that pool.”

At CIBC, ad­vi­sors were happy that their bank still is com­mit­ted to pro­vid­ing a DB pen­sion plan for its staff.

“[We have a] de­fined-ben­e­fit pen­sion plan,” says a CIBC ad­vi­sor in On­tario. “Con­sid­er­ing [this type of pen­sion] is a dy­ing breed, it’s nice to have.

How­ever, var­i­ous CIBC ad­vi­sors pointed to a cap on pen­sion­able in­come as a ma­jor draw­back of the bank’s DB plan.

“We sea­soned ad­vi­sors, we make a lot of money, but our pen­sion is low,” says a CIBC ad­vi­sor in On­tario. “It could be bet­ter by pro­vid­ing a higher pen­sion limit.”

“[Pen­sion­able i ncome] caps out at a cer­tain level based on pay grades, which is a bum­mer,” adds a col­league on the Prairies. “But I’ve taken care of my own fi­nan­cial plan­ning to make sure I’m not just re­ly­ing on the pen­sion plan.”

How­ever, Scott Wam­bolt, se­nior vice pres­i­dent, na­tional sales and ser­vice, with CIBC, is adamant that the bank’s pen­sion plan holds its own. He notes that CIBC in­creased its max­i­mum pen­sion­able earn­ings thresh­old a few years ago: “We bench­mark it and we think it’s very com­pet­i­tive.”

Mean­while, ad­vi­sors with Toronto-based Bank of Nova Sco­tia were the most dis­pleased with their bank’s pen­sion plan struc­ture, rat­ing it at a sur­vey low 7.4. Although many newer ad­vis- ors cited the move away from DB as rea­son for their dis­sat­is­fac­tion, more ex­pe­ri­enced ad­vi­sors who still are on the old DB pen­sion plan were quite dis­pleased with some changes coming their way.

“[The pen­sion plan is] crappy, but I knew that go­ing in. It’s com­pletely changed for new peo­ple,” says a Sco­tia­bank ad­vi­sor in On­tario.

Alice East­man, se­nior vice pres­i­dent, cus­tomer ex­pe­ri­ence and dis­tri­bu­tion strat­egy, with Sco­tia­bank, con­firms that the bank moved to­ward a “hy­brid pen­sion ar­range­ment” that con­sists of DB and DC com­po­nents for those hired af­ter Jan. 1, 2016.

Fur­ther­more, in Septem­ber 2015, Sco­tia­bank ad­vi­sors were in­formed of changes to take ef­fect in Novem­ber 2018. At that point, ad­vi­sors will no longer have the op­tion of trans­fer­ring the com­muted value from their pen­sion plan at re­tire­ment and will only re­ceive monthly pay­ments.

“We wanted to be more aligned with the mar­ket, fun­da­men­tally,” East­man says of the changes.

Although the changes aren’t yet in ef­fect, they were a point of con­tention, as many Sco­tia­bank ad­vi­sors cited the im­pend­ing in­abil­ity to take a lump-sum pay­out of their pen­sions.

Says a Sco­tia­bank ad­vi­sor in On­tario: “Not hav­ing the op­por­tu­nity to move your pen­sion to where you want to man­age it is shame­ful.”

“The pen­sion plan is not as good as be­fore. They don’t of­fer DB to the new hires any­more”

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