Part One: Get your retirement plan on track

In episode 13 of the Financial Checkup, we hear the Advantages Retirement Plan™ Specialists, Yash Khubchandani and Guillermo Nafarrate, address common retirement planning challenges and explain how the Advantages Retirement Plan™ helps physicians and their spouse/common-law partner meet their retirement goals.

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Automated: Reducing your fees is extremely important, not just now, but also in retirement. Reducing your fees allows your nest egg to last longer and, more importantly, produce more income for retirement.

Welcome to the Financial Checkup, a podcast series devoted to improving the financial health and retirement readiness of physicians and their spouses or common-law partners. This series is brought to you by the award-winning Advantages Retirement Plan from OMA Insurance. This episode features audio from an Advantages Retirement Plan webinar recorded in May 2022.

Otniel Trejo: Hi, everyone. Thank you for joining us today. I am Otniel Trejo, manager of the internal advisors here at OMA Insurance, and I am your host for this afternoon's webinar on this very important topic, how to get your retirement plan on track. Today, we'll be covering three key questions to help you get started with retirement planning, or if you already have a plan in place, how to keep your plan on track. Quick disclaimer, please keep in mind that we're providing this presentation as an educational resource for you. Our comments today are based on our experience supporting physicians with their retirement planning, but it is not meant to be used as financial advice. With me today, we have two special guests. Let me introduce you to Yash Khubchandani and Guillermo Nafarrate.

Yash Khubchandani:       Hey, everyone.

Guillermo Nafarrate:      Hi, everybody.

Otniel Trejo: Both of these gentlemen are our retirement specialists with OMA Insurance. Yash is a certified financial planner with nearly 10 years of experience in working with insurance companies and non-for-profit. Guillermo is an experienced financial professional who has worked for banks, as an independent owner, and for non-for-profits.

In today's presentation, we'll be speaking to some retirement planning challenges that are common among our OMA members. To illustrate this, we have created two fictional physicians, Dr. Fisher and Dr. Chang. Dr. Fisher is someone who's just getting started, has a little bit of savings, but doesn't have a clear retirement planning strategy in place. Yash will be speaking from this perspective. Dr. Chang is someone who has been saving for quite some time, but she's wondering if she's on the right track. Guillermo will be speaking to this from this perspective.

We have partnered with experts to create the Advantages Retirement Plan, which has one purpose, and that purpose is to help physicians earn more money in retirement and to retire when they want. Yash and Guillermo, let me ask you a few questions here so that people can see how you support, being a retirement specialist, our members. So, Yash, when supporting physicians like Dr. Fisher, how are you helping them plan for their retirement today?

Yash Khubchandani: For most physicians, this is something that they usually start planning for later on in their life and is not something they look into earlier on in their careers. Usually most physicians already do have some savings worked up at the moment. In most cases, they are towards particular general savings goals or TFSA or just in an RRSP with no direction in mind here. When we're looking at retirement, what we're looking to do is take a look at your investments with a different perspective. Just your portfolio for retirement needs to be taken into a consideration in a different format.

Some of the starting points that you want to look into when planning for your retirement is when do you want to retire? Now as a unique physician, you have a unique need here. You're looking at retiring either part-time, either retiring in the format of taking a year off and then coming back to work or in the format of retiring completely. As a physician, when we're looking at when you need to retire, you do need to see when is the last year I'm looking at accessing the funds within my portfolios? When is it that I need a cash flow coming out towards my end as opposed to putting towards it.

Another question you can ask yourself towards retirement planning is how much income do you want every year in retirement? Now that's a question that's actually easy to answer at this current point. Most physicians when looking into retirement planning can look at their current financial structure. They can look into their current spending habits with higher liabilities and assume for 60% of that as a need in retirement.

Now coming to the last point in terms of retirement planning, one of the most important things we need to look into is how many years are we actually going to need this income for? Now that is more of a unique situation to each physician. It depends on your life expectancy. It comes down to your personal health as well as your family's health. In this case, it helps us get an idea of how much funds you would require at the end of retirement, when you begin your retirement in order to go ahead and retire safely and have those amount of retirement savings to split over that. If you look at these three particular aspects here, you would have the good starting point to start off on your retirement journey.

Otniel Trejo: Yes, thank you. I completely agree with you, Yash. Guillermo, I'm going to ask you the same question. When supporting physicians like Dr. Chang, how are you helping them plan for retirement today?

Guillermo Nafarrate: From my experience, most members understand that it is important to save and the importance of using RSPs and TFSAs. But what I've come to see is that we've run into some challenges in the sense that they become a little too comfortable with their existing financial institution. They may not realize that their retirement plan may not be optimized. They actually could be getting hammered with large annual fees. From time to time, it's worth getting a second opinion to identify any opportunities to improve the financial picture. As you know, OMA's a not-for-profit. Yash and I, as the ERP specialists, we are non-commissioned advisors, so we can really help review the portfolio risk allocation, performance, help identify any hidden fees, and really provide an unbiased opinion to help you identify material facts.

Once we've educated you on your portfolio, we would then transition to what our retirement plan has to offer to make a comparison analysis to determine if we're able to help you or not. This really helps our members plan moving forward for retirement for an optimized approach.

Otniel Trejo: Yeah. No, that's an excellent suggestion. Yash, when supporting physicians like Dr. Fisher, why would someone consider saving within the Advantages Retirement Plan?

Yash Khubchandani: To be honest, OT, here with regards to the Advantages Retirement Plan, this is a program that's available to members as a member benefit. It actually takes the confusion out of investing and simplifies the process. The reason I say this is because with regards to investment planning or retirement planning as well, there's various decisions to make when looking into it. You're looking into what the fees are, who your provider of funds are, when do I need to invest, should I try in the market or not, or is my advisor giving me the right advice? These are some of the things that the Advantages Retirement Plan takes into consideration, brings all the confusion out of place, and gives you direct answers, too. You can actually use the Advantages Retirement Plan for some of their key features.

 As a member, you can use the Advantages Retirement Plan self-service portal. This is something that gives you a visualization of your retirement journey, shows you how this particular plan would work, and simplifies pretty much every aspect of your retirement going forward. What it brings to the table in terms of this particular retirement journey is BlackRock and their funds. We're accessing our partner's, BlackRock, the largest asset manager in the world at the moment, and the fact that they are currently leaders in institutionalized funds in retirement planning. They do provide funds the most direct contribution pension plans at the moment as well. It's their experience along with low fees along with the Advantages Retirement Plan helping us sort out all these aspects that helps our members come over to us and take their retirement journey one step at a time.

Otniel Trejo: Yeah. Excellent. Leveraging BlackRock's expertise, low fees. I would also probably add the auto escalation feature, which really speaks to the flexibility of the program, where it puts the member in control of their savings and how they can achieve their retirement savings goal. If, maybe in the beginning, the budget's limited, the auto escalation feature can actually help them catch up in later years, so excellent feature to have.

Guillermo, when supporting physicians like Dr. Chang, why would they consider saving within the Advantages retirement program?

Guillermo Nafarrate: Yeah. Thanks, OT. What's important here is to look at the benefits of what we have to offer to where someone like Dr. Chang might be today. What I've seen or what I explain to the members is that when you're dealing with a bank or a wealth management firm, okay, they typically have you complete something called an investor policy statement, or Know Your Client form, which is a little questionnaire that categorizes you into a risk profile. They will then match your risk profile to a mutual fund or portfolio that falls within those parameters.

I don't think this is optimized or tailored for retirement. Here, at the OMA, we do not do this. Instead, we ask when do you want to retire? Based off of this target date, we then determine a starting asset allocation for you. We're very fortunate to work with BlackRock as the largest asset manager in the world. As a portfolio manager, BlackRock will tactically rebalance the portfolio annually. The portfolio comprises of nothing but ETFs, okay, so there's a big difference there.

 Why would we take this tactical rebalancing approach versus the traditional bank or wealth management risk categorization approach? Because of market risk. We cannot control market risk, be it a pandemic, a war, rising rates, inflation, anything you can think of that would push markets higher or lower, it's out of our control. By tactically rebalancing annually, we achieve what we call in the industry risk-adjusted returns through an efficiency frontier, so that if there are any shocks in the market at any point in your career, you're going to have the most optimal asset allocation relative to how far or close you are to that target retirement date. This really works, folks, okay.

The performance solidifies this, and although past performance doesn't indicate future performance, we have a long-term metric that we look at, and we've outperformed most institutions. We have a high degree of confidence in BlackRock. All of this is achievable with an extremely low fee. Reducing your fees is extremely important, not just now, but also in retirement. Reducing your fees allows your nest egg to last longer and, more importantly, produce more income for retirement.

Otniel Trejo: Well, I agree. That's an excellent feature. Yash, when supporting physicians like Dr. Fisher, how does the Advantages retirement program help our OMA members achieve their retirement goals?

Yash Khubchandani: For a situation like Dr. Fisher, as she is starting out in her retirement journey, she's got some money already accumulated towards that, some of the things that Advantages Retirement Plan can help make easier for us is, obviously, the access to self-service portal. This is brought to us by our partner, Commonwealth. What this does is help her visualize her retirement journey, gives her access to the plan at all times to be able to have some control over it.

Along with that, as Guillermo mentioned and I did in the past as well, BlackRock is our partner here. What they do offer is tactical rebalancing. Now this, as Guillermo mentioned, is taking a look at your portfolio and making sure we adjust for risks going forward. How this can help a member like Dr. Fisher is as she's not aware of the retirement journey she's on and needs more help with this, this actually helps her deal with all the shocks that would come in the next following years.

Now, usually this is something you do with an advisor when you have access to one. They're going to sit with you, decide what part of the journey you're in, take a look at your risk frontier, and adjust your portfolios accordingly. Those assets are going to be rebalanced based on conversations between you and your advisor.

What BlackRock offers here is simplifying that process. Instead of you having to keep track of the plan, the plan keeps track of your life and continues on in helping you on that journey. The automatic rebalancing is definitely something important for our members that's offered here. Along with that, as you mentioned as well, the auto escalation features. For members starting out later in their plans, they're definitely looking at either catching up or at least maintaining for inflation. The auto escalation is an award-winning feature that we have as part of the Advantages Retirement Plan. Now what this allows a member to do is to either catch up for inflation if they're already on track with their retirement journey. If they're not, it allows for them to actually start saving towards it, but also gives them an opportunity to catch up very soon and be on track for that.

Along with that, recently, BlackRock's also taken into consideration ESG metrics. Going forward, that's also going to be looked into within our funds. ESG is environmental, socially, governable metrics that are taken into consideration when devising these particular life path funds that are available to you through the Advantages Retirement Plan. Doing so also helps in them deciding the investments laying within these funds in the background and how they can be managed for lesser and lesser risk and more efficient returns. In this case, I think the ERP brings these particular features that can help out any starting physician with regards to their retirement journey and clear the path for them.

I think the ESG governance is a very important piece because anything that can hurt either people or the planet will be gone, removed from our portfolios. This is great. We want to put our money towards good things, right, shifting that spotlight towards sustainable energy and other things. We actually believe this will, in the future, increase the performance as well as the overall global spotlight shifts towards these type of investments moving forward.

Otniel Trejo: No, absolutely, I agree. Guillermo, when supporting now physicians like Dr. Chang, how does the Advantages Retirement Plan help our members achieve their retirement goals?

Guillermo Nafarrate: Yeah, for sure. Members like Dr. Chang basically come and ask me, can I retire and how far or close I am? Well, we have a fantastic feature that is built into the plan. It's really a retirement tool. It helps identify how far or close you are to hitting those retirement saving goals. The tool is going to recommend exactly how much you need to save in order to reach your goal by that specified retirement target date. You want to determine how much you need in retirement. You want to know how much to save every month to hit target. This is the tool for you, right. It accounts for very important factors that account towards retirement and use conservative metrics to ensure that you get there. It recommends exactly how much you should be saving every month. Taking this one step even further, it tells you where to put it, whether it's RSP, TFSA, combination of the two. It's going to optimize your plan. It's a fantastic tool to help you stay on track.

Yash Khubchandani: Actually, I'd like to add as well something that might work for Dr. Fisher as well as established physicians like Dr. Chang is the low fee structure. We've actually not gone into this feature yet. The low fee structure offered by the Advantages Retirement Plan is a unique feature to this plan not only because of the fact that it's a lower number available to you in the market, but this is actually a key feature in your retirement journey. As we mentioned, that rebalancing that's offered to you by BlackRock is usually done by advisors that you deal with.

Now, normally, if that is being done in the right way, those fees may make sense for you. But, overall, the amount of fees that you pay in the market is much higher than what we offer. The reason why we want to bring that up is because of the fact depending on how long you have before you want to retire or how long your financial horizon is, those fees can actually deplete a number of years worth of retirement savings in your portfolio. For someone starting out later or for someone established as well, these are important aspects as well.

Otniel Trejo:  Thank you both. This was a great discussion. If you would like to learn more about the Advantages Retirement Plan, please visit our website at www.omainsurance.com/retire. It's easy to enroll, but you don't have to do it on your own. Feel free to book an appointment with one of our specialists, and they can help you with the enrollment process or answer any questions or inquiries that you may also have. Thank you so much, everyone, and have an excellent afternoon.

Automated: The Financial Checkup series is produced in collaboration with OMA Insurance and Commonwealth, the administration and technology partner for the Advantages Retirement Plan.