Many Canadians are challenged to overcome barriers to retirement planning, such as the perception that the process is too lengthy, complicated and overwhelming.
If such barriers can be effectively removed, the financial security of Canadians would be improved—and advisors would potentially have more engaged clients.
As part of its seniors strategy, the OSC studied and analyzed barriers to retirement planning and published details in a report. In addition to a literature review, the OSC conducted qualitative interviews with pre-retired Ontarians aged 45 and older and two financial advisors.
(Interestingly, people differed on the definition of retirement plan, with some understanding the term to mean “pension plan,” highlighting the need for advisors to effectively communicate their services.)
Overall, the report proposes 30 initiatives and tactics, informed by behavioural science, to encourage retirement planning. These initiatives could to be implemented by various stakeholders, including financial institutions, government and employers, says the report.
One recommendation is to require people to actively choose to make a retirement plan. For example, employers could pre-book meetings with employees and advisors during the workday. “Employees would then have to choose to turn down the meeting rather than choose to schedule one themselves,” says the report.
A similar tactic is to make the future seem close or salient so that people take action. For example, an effective communication is one that includes pictures of different ways to spend retirement and prompts people to take action by choosing one.
Keeping people from being overwhelmed or feeling other negative emotions is also important to the planning process. For example, one advisor interviewed said she has simplified her onboarding assessment questionnaire from its original 15 pages.
Good news for advisors, interviewees said they want personalized advice for retirement planning; however, barriers might prevent them from seeking professional help.
For example, they might not know what to ask advisors, and they may be unable to answer basic financial questions—an inability that arouses negative emotions.
Read: Your part in Canada’s plan to boost financial literacy
“One financial advisor described a client who cried as she noted that she had been too embarrassed to sit down with a financial advisor or anyone else because she didn’t feel like she knew enough about her own investments,” says the report.
One suggested tactic—to create a list of questions to help start conversations—is well-known to advisors, but it’s helpful to be reminded how overwhelming and embarrassing finances can be for clients.
Some of the suggested approaches in the report were tested using a randomized control trial, detailed in the report.
Five different messages prompting people to use an online retirement income calculator were included in a weekly newsletter emailed to over 70,000 Ontario public service employees. Each employee received one of the five messages, and the experiment tested how effective each message was in prompting employees to access the calculator and begin completing it.
The experiment found that helping people imagine their social selves in retirement by evoking time spent with friends and family can be highly effective.
Read: Learning to love your future self
To implement this idea with clients, potential questions include, “Picture yourself in retirement—what are you doing? Who are you with?” Clients could also be encouraged to write down details from a day in retired life.
For more details, read the full report.