Evolution is often associated with industry and technology. But it also applies to retirement — both the needs of today’s retirees and solutions offered by the financial services industry. In this Q&A — part 1 of a 4-part series about the key components of comprehensive retirement planning — Sun Life Financial’s Vineet Kochhar, Vice President, Insurance Solutions, Individual Insurance and Wealth, comments on the current retirement market, how the financial services industry has responded and the increasingly important role advisors play in helping Canadians retire comfortably.
Q: Retirement is different today than it was for previous generations. What do you think is driving this change?
A: For our parents or grandparents, saving for retirement was often looked after by the company they worked for. They would work for a number of years, participate in a defined benefit pension plan and, through a simple formula, receive an income that would last their entire retirement.
Now, employees don’t often stay at the same company for their entire career, and the responsibility for retirement is increasingly being downloaded to the employee. Many companies have moved away from traditional defined benefit plans to defined contribution plans, where they pay dollars into an account, often matching the employee’s contributions to the account. It’s up to the employee to choose the amount to invest, the right investments, the right time to retire, the spending pattern or income in retirement and ensure that it lasts their lifetime.
Q: Why is this so challenging?
A: Canadians aren’t saving enough, interest rates are incredibly low and markets are volatile. So when you consider all these things plus the fact that Canadians are living longer1 — which means they’ll have more years in retirement — retirees face a very different set of challenges than prior generations. And they’ll need help finding effective solutions to reflect their particular scenarios, paying particular attention to longevity.
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Q: Are there effective solutions available?
A: Absolutely. There are a wide variety of solutions for today’s retirees, from guarantee-type investment structures — like payout annuities and segregated fund contracts — to mutual funds oriented around retirement goals, such as target date funds. Life insurance is an important part of legacy and estate planning. Health, critical illness and long term care insurance can help address health-care needs and help protect against the financial risk of unexpected health events that may impact a client’s retirement plans. In the last few years, insurance and wealth products have evolved specifically to suit the needs of today’s retirement market. And what’s great for clients is that through careful planning and choice, there are products or combinations of products that can help them achieve their retirement goals.
Q: In your opinion, what other kinds of changes might we see in financial services and products in the coming years?
A: I believe we have the right product solutions in place for today and we will continue to look for opportunities to innovate as the needs of clients and advisors evolve. Financial advice will continue to be important to clients. Clients need help choosing the right solutions. But this can be quite complicated. So I think, as an industry, we need to make it easier for people to understand their situation, understand that there are solutions to help them, and continue to encourage them to gain confidence in their retirement planning through the support of a professional advisor.
We also have to embrace the fact that more Canadians want digital experiences so we need to continue moving away from paper-based processes to digital processes. And service will evolve to become faster and more effective, and clients will expect to be able to do some things themselves.
Q: Now, more than ever, Canadians are involved with their finances and likely to use online resources (especially wealthier individuals2). Despite this shift, advisors are still in demand as a source of advice – why?
A: There’s a lot of great information on the web, and many companies in the industry have done a nice job of providing information that’s easily accessible online. And I think it’s important that Canadians take command of their retirement planning and access as much of this information as they can. But once they do, some may realize that the issues are complex and that their decisions are critical to their retirement success. They’ll want professional advice to help them work through their questions, understand all their options, and be more confident in developing and sticking to a plan – a comprehensive plan. An advisor can help them create a retirement plan that meets their goals and needs, choose the right solutions and help make course corrections when situations change.
Q: You’ve spoken of the need to shift from product sales to helping clients choose the right solutions. What does this mean?
A: For clients, the product isn’t the want, it’s the vehicle that gets them to their desired outcome. Most clients don’t suddenly realize “I need more mutual funds or par insurance.” The need is around growing their savings or protecting their assets or loved ones — that is, having solutions to help them meet their financial goals and well-being throughout their life.
Helping clients choose the right solution starts with understanding a client’s specific stage of life and their needs, helping them create a plan, and then showing them the solutions that can help fulfill the plan. Everyone’s situation is different. Clients need to know that products can be tailored and combined in different ways to help provide specific solutions for their circumstances, and how these solutions can be adjusted as their needs change over time.
For example, if you look at retirement planning, it’s about understanding:
- where clients are with their current savings,
- how much retirement income will be required to cover their basic necessities and enjoy their planned lifestyle,
- how they’ll prepare for the unexpected situations, and
- what their legacy and estate plans will include.
There is no single product that advisors can put in place to help clients with all this. It’ll require a combination of wealth and insurance solutions. And again, this combination will be different for every client, requiring a customized and comprehensive approach.
Q: How will this shift help clients reach their retirement goals?
A: I believe it will help clients feel more committed and confident about their retirement plans and reinforce that trusted relationship with their advisor. They’ve worked with their advisor to create a plan to meet their retirement needs and choose solutions to help achieve the goals outlined in their plan. They’ll continue to work with their advisor, sharing their path through retirement.
Did you know?
- 93% of retirees rate the value of advice provided by their financial advisor as very good/good.
- Those who work with an advisor are significantly more likely to be satisfied than those who don’t.
Q: The ability to retire comfortably typically requires careful planning. What do you believe are the key components of a successful retirement plan?
A: 3 things:
- Creating a written ‘living’ financial/retirement plan to help meet a client’s goals;
- Putting solutions in place to help meet that plan;
- Checking in on the plan with their advisor at least annually and making sure everything remains on track.
Q: Candid conversations between clients and their advisor are an important part of retirement planning. What are the most common questions clients have as they think about their retirement plans?
A: I think many clients wonder: Do I have enough to retire? How will I spend my money? What will I do every day? Should I worry? When can I retire? Will I outlive my money? How do I make a retirement plan — and will it even work? What happens — or how will my plan be affected — if I get sick or something happens to me? Will I have money to leave to my family?
Through candid conversations, advisors have a tremendous opportunity to help clients work through these and other important questions, which will help clients define and reach their goals and help ensure their financial needs – basic living, savings, health, lifestyle and legacy – are covered.
Q: How would you complete the following sentence? For advisors to succeed in today’s retirement market, they must…
A: Advisors have to take a comprehensive approach. This includes knowing financial products — life, health and wealth — very well and being able to work with clients to help them build the right solutions for their situation using these products. They have to spend the time to be a financial coach for their clients, understand their needs and recognize how their needs will change throughout retirement, by being there for clients on an ongoing basis. They need to break down the complexity of all products into simple solutions for specific situations. They need to be their clients’ trusted advisor, today and throughout retirement.
Q: There are many financial services organizations that advisors can choose to do business with. What advice do you have for advisors when deciding which organizations to work with?
A: Seek out companies with a great product shelf that covers a range of solutions. They should provide the tools and expertise to help design solutions for different client situations. They should offer a strong client-oriented service experience — simpler underwriting, quick turnaround, excellent service and plain language. They should have a client-focused approach and be investing in the future in areas like digital capabilities to continue breaking down the complexity and enable advisors and clients to have these important conversations.
This article is the first in a 4-part series. Watch for more articles in the coming months to learn more about how to include life, health and wealth solutions in your clients’ plans — and help them retire comfortably.
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1 Life expectancy at birth is 79.6 for males and 83.8 for females. Source: CANSIM table 053-0003, Statistics Canada, 2017.
2 Canadians & Financial Advice, Ipsos, 2017.
Vineet Kochhar is Vice-President, Insurance Solutions, Individual Insurance and Wealth at Sun Life Financial. He’s dedicated to the development, management and delivery of end-to-end solutions to help clients address their financial goals at different moments in their life journey. Previously, as Sun Life’s Vice-President, Sponsored Markets and Finance in Client Solutions, Vineet was responsible for the finance and related risk, actuarial and pricing functions. And as the company’s Vice-President, Business Excellence, Canadian Operations, he led transformational change initiatives to enhance the experiences of clients throughout SLF Canada. Before joining Sun Life in 2009, Vineet held various senior leadership positions within Mercer’s Canadian and global businesses. He has a Bachelor’s degree in Actuarial Science from the University of Toronto and is a Fellow of the Society of Actuaries and the Canadian Institute of Actuaries.