Pension plan sponsors need advisors — but not all should apply

(February 5, 2004) Pension plan sponsors looking to provide their employees with education and advice about their plans should engage the services of financial planners. But they should also be sure to hire qualified, properly resourced firms or individuals, says Advocis chair Brian Mallard.

Mallard — speaking to a room full of defined contribution plan sponsors and providers at the Fifth Annual DC Plan Summit today in Montreal — argued that plan sponsors face increasing pressure to bring in third-party advice-givers because of the proposed guidelines on capital accumulation plans, increasing plan sponsor fiduciary responsibilities and more complex plan designs.

“Advice is what everybody wants,” Mallard said. “I don’t believe most plan members are capable of making decisions and then sticking to them. Individuals will ultimately fail,” he warned.

“More and more Canadians are going to turn to employers to provide advice and financial planning,” Mallard told the delegates. “As a plan sponsor, you need to have a provider who can give advice to your plan members right into their retirement, or else you’ll have people knocking on your door,” he added, acknowledging plan sponsor fears about employee litigation.

Mallard says the opportunity for advisors to provide services to pension plan sponsors in Canada is indeed growing and potentially very lucrative. But in his address he warned that companies looking to hire advisors face the same challenge as individual Canadians — how to ensure you hire one that’s qualified, ethical and competent. “Not every financial planner in this country is actually doing financial planning or even capable of doing it,” he said.

That comment later prompted questions from delegates about how they should go about finding the right advisor. Mallard said it starts with looking for the right designations, citing the CFP and CLU. But beyond that, he said an advisor and his firm’s years of experience, resources and previous success with other clients is key. “If you go to a heart surgeon, you’d like to know he has all the right credentials and experience, but then you’d also like to know there are some living patients as well.”

In his own practice, Mallard says he’s won the business of providing third-party advice to plan sponsors only after enduring a lengthy and thorough due diligence process. Detailed proposals are asked for, followed by several interviews with the firm’s advisors and staff — a process that can take months.

Still, the work can pay off in multiple ways. Aside from the contract with the plan sponsor to provide financial planning educational advice, Mallard says many of the individual employees later decided to transfer their assets to his firm.

Asked about his advice to advisors looking to win this kind of business, Mallard warned, “Every plan sponsor is afraid that they are going to hire someone who’s going to turn out to be a salesman — so don’t be a salesman.”

Filed by Darin Diehl, ADVISOR Group, darin.diehl@advisor.rogers.com