Investor blamed advisor for poor retirement planning advice

The client had worked at a public utility for about 15 years when he changed careers to become a teacher. After leaving his job, the client received a benefit statement for his utility pension, which he sent to his financial advisor. The advisor told him that he could transfer the pension to a locked-in retirement account (LIRA) and helped him complete the transfer documents.

About six months later, the client discovered that he had the option to buy additional pension benefits with his new employer. This was an attractive option because it would entitle him to significant additional pension benefits and would allow him to retire earlier with a full pension. His advisor arranged for him to complete the pension buyback using the money he had transferred to his LIRA, money from his RRSP and a low-interest loan.

The client later learned that he could have paid about $40,000 less and retired three years earlier if he had done the buyback the previous year. He also said that his advisor had been negligent in failing to provide the option to transfer the pension between plans.

The firm replied that the client had received full disclosure of his pension options from both his new and previous employer. It said that the client had not asked about his other choices because he wanted to transfer to an investment program his advisor had recommended.

OBSI investigated the complaint. The advisor had advertised her Certified Financial Planner (CFP) designation, had signed a financial advice agreement with the client and had provided a detailed written financial plan. The client said he relied entirely on his advisor. The advisor said that she was aware of the option to transfer into the new pension plan rather than to a LIRA, but did not discuss it because the client did not ask.

Given her credentials and her undertaking to provide comprehensive financial advice, we concluded the advisor should have informed her client of his various pension options or referred him to a specialist. At the same time, we found that the client did not review his pension documents or ask his plan administrators about his options. In our view, the advisor had a greater degree of responsibility in the circumstance. We recommended that the firm compensate the client for 80% of his losses.

(2008)