Author Topic: How to convince my company to provide low-cost ETFs in group RSP  (Read 2043 times)

Darren

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How to convince my company to provide low-cost ETFs in group RSP
« on: December 20, 2018, 07:56:49 AM »
Hi guys,

I have tried several times to convince my company to offer low-cost index funds or ETFs such as Vanguard Canada's ETFs in our company group retirement savings plans (RSP). The financial firm my company works with currently offers typical Canadian mutual funds in the range of 1.5-2%. So I'm paying something like 1.5% for a Canadian Equity fund that does the same thing as VCE, which costs 0.05%.

I've brought this up to the company several times over the years and don't give much of an answer other than a simple "no". I typically pitch it as "Hey, I know you guys don't have to offer us any pension or RSP, but you do and I think that's great. But there are options out there that are much cheaper than what we currently pay. If a new employee starts their retirement fund paying the low fees of products like Vanguard ETFs they will retire thousands of dollars richer than if they saved using our current products."

The company does match up to 3%. The company is large (20,000 worldwide), but only has a small presence in Canada where I am (about 100 employees). So we're really only talking about a group RSP for 100 people or so.

Question 1: What do corporations look for when they decide on a pension or retirement fund provider? What incentives do financial companies offer to entice other businesses to use their services? Basically, what reason might my company have for not wanting to offer Vanguard ETFs that I might not be aware of and how can I counter?

Question 2: How do I get my company to change their mind??!! Do you have any advice for how to phrase or position my request? I think moving away from expensive mutual funds to cheaper and proven ETFs such as Vanguard will increase the wealth of all of the employees, which is a great thing.

Thanks for any help you can offer.

Reynolds531

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Re: How to convince my company to provide low-cost ETFs in group RSP
« Reply #1 on: December 26, 2018, 07:44:44 PM »
The problem is there are only 100 members ie probably less than $5 million in assets. Your high expenses are there to offset what your company would otherwise pay for recordkeeping. A typical plan at sunlife for instance the employer pays a few bucks every month per employee. And sunlife collects the real money off fund fees.

Your employer also chose to sidestep all the pension legislation by going the rsp route. They have a limited duty under the cap guidelines to offer a reasonable product. They can argue two percent is reasonable.

You are best off to look at the plan docs and see if you're allowed to periodically do a sheltered transfer to your self directed. Make sure you don't lose the match by doing so.

The smallest plan I've worked on was about $100 million and even at that level fees are always a battle.

Darren

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Re: How to convince my company to provide low-cost ETFs in group RSP
« Reply #2 on: January 02, 2019, 11:54:55 AM »
Thanks for this information. This is very helpful. I'll look in to a sheltered transfer to my self directed account. Thanks!

Prairie Stash

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Re: How to convince my company to provide low-cost ETFs in group RSP
« Reply #3 on: January 03, 2019, 07:57:53 AM »
I joined the company pension comittee. Most large companies have an employee representative, its good practice. My company is under 500 people, so we're a bit larger then you but not incredibly large. An average member, since we have some very long term employees, is around $100k in assets. Once people start hitting 20 years, plan vaues get large.

On a plan with a total value under $50 million our fees are under 0.5% for most products. That includes producs that rebalance as you age, active managed funds, money market funds etc. Our money is pooled with other companies, its not like they manage our money seperate from the other billion under management.

A few years ago they switched up the plan to improve employee compensation, it was done to attract new employees. No one actually cares about you or me (don't be offended, just making a point here), but they care about attracting new talent, that's the driving force behind getting the pension revamped. So if you want a new plan, you need to work with HR to improve the companies ability to attract new employees, that tends to be a better pitch then worrying about returns for current employees. Would your company rather have an average plan or a competitive plan to pitch to new recruits?

Reynolds531

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Re: How to convince my company to provide low-cost ETFs in group RSP
« Reply #4 on: January 03, 2019, 05:15:09 PM »
Be careful about joining a committee. Years ago when this concept launched the conventional wisdom was that boards or committee members (they're different) were exposing themselves to liability if the plan performed poorly. If you do join be sure to get an indemnification in writing from the company.

I spent eight years on a board and new members were always shocked by this.


 

Wow, a phone plan for fifteen bucks!