# Group RRSP(insurance co's vs banks)



## jimmyTO (Aug 6, 2017)

Appologies if this isn't the right section of the forum to post something like this. Looking at putting together a group plan for the employees(mix of savvy + really inexperienced investors). Anybody have any recent experience in setting up a plan?
Working with our broker and they are recommending certain insurance companies which have a large piece of the market, however, it appears that insurance companies only have access to mutual funds and not etf's or other types of a la carte choices...most seem to have access to Blackrock though, but that's the extent of it. It looks like if you go with a bank(like an RBC or CIBC) they can offer etf's as well as mutual funds, at very competitive fees as well. Our broker is advising against going with a bank(not in their interest), but it looks like from a high level view that banks are the way to go in terms of offering employees the widest selection of choices at the most competitive rates. Unless it's a complete nightmare to administer, it looks like a no-brainer, unless I'm missing something...


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## Beaver101 (Nov 14, 2011)

jimmyTO said:


> Appologies if this isn't the right section of the forum to post something like this. Looking at putting together a group plan for the employees(mix of savvy + really inexperienced investors). Anybody have any recent experience in setting up a plan?
> Working with our broker and they are recommending certain insurance companies which have a large piece of the market, however, it appears that insurance companies only have access to mutual funds and not etf's or other types of a la carte choices...most seem to have access to Blackrock though, but that's the extent of it. It looks like if you go with a bank(like an RBC or CIBC) they can offer etf's as well as mutual funds, at very competitive fees as well. *Our broker is advising against going with a bank(not in their interest*), but it looks like from a high level view that banks are the way to go in terms of offering employees the widest selection of choices at the most competitive rates. Unless it's a complete nightmare to administer, it looks like a no-brainer, unless I'm missing something...


 ... are you sure the "broker" in your case not an insurance agent? and if you're going with the bank route - or bank administered group RRSP, who'll be assisting with its set up and administration going forward?


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## jimmyTO (Aug 6, 2017)

He's a broker. Our controller/office manager would administer the plan if we went with a bank.


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## ian (Jun 18, 2016)

As an particpant, I much preferred the two insurance group RRSP programs that I participated in to the no group bank RSP that I also had.

My experience was that the fund managment fees were much lower (not sure if my employer subsidized these or not) and I was happy with the investment choices offered by both insurance firms. Returns were slightly better with the insurance companies.

I suspect the answer may lie with what investment choices/funds you select for your employee plan and whether those funds have a reasonable management.

Two things that really surprised me with our group plan (there was a matching component). The first was the take rate. I thought it would be very high. Why not...free money? Well it was not. About sixty five percent. The second stat that shocked me was how infrequently members a) bothered to even log into their investment accounts and b) even lower was the percentage of participants who actually adjusted their fund selections over time to respond to changing economic conditions/opportunities. Bottom line...the smart ones and the savvy investors will fare just fine-inside and outside of the program. The remainder of the participant will will just bounce along the road without doing much past their first enrollment, fund selection, and fund allocation.


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## Beaver101 (Nov 14, 2011)

ian said:


> As an particpant, I much preferred the two insurance group RRSP programs that I participated in to the *no group bank RSP *that I also had.
> 
> My experience was that the fund managment fees were much lower (not sure if my employer subsidized these or not) and I was happy with the investment choices offered by both insurance firms. Returns were slightly better with the insurance companies.


 ... your employer would definitely have negotiated the fund management fees. And if your employer is large enough, then MERs would be much lower than that of retail (or your no group bank RSP). And which should effect higher returns. 




> I suspect the answer may lie with what *investment choices/funds *you select for your employee plan and whether those funds have a reasonable management.


 ... most definitely but investment choices would be quite limited to that of mutual (including index) funds. No ETFs or stocks (no sure latter is allowed in a group RRSP at the bank though).



> Two things that *really surprised me *with our group plan (there was a matching component). The first was the take rate. I thought it would be very high. Why not...*free money*? Well it was not. About sixty five percent.


 ... that's because the free money is piddly compared to the salaries paid.


> The second stat that shocked me was how infrequently members a) bothered to even log into their investment accounts and b) even lower was the percentage of participants who actually adjusted their fund selections over time to respond to changing economic conditions/opportunities.


 ... how do you know that? Were you doing the analytics?


> Bottom line...the smart ones and the savvy investors will fare just fine-inside and outside of the program. The remainder of the participant will will just bounce along the road without doing much past their first enrollment, fund selection, and fund allocation.


 ... each to their own?


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## fireseeker (Jul 24, 2017)

Beaver101 said:


> ...
> ... that's because the free money is piddly compared to the salaries paid.


You ever see office workers react when free pizza or cake comes out? It's a feeding frenzy.
I don't think the 65% takeup on the group RSP is because it's piddly -- it's thousands of dollars in most cases -- it's because of financial illiteracy and financial fear.


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## Beaver101 (Nov 14, 2011)

fireseeker said:


> You ever see office workers react when free pizza or cake comes out? It's a feeding frenzy.
> I don't think the 65% takeup on the group RSP is because it's piddly -- it's thousands of dollars in most cases -- it's because of financial illiteracy and *financial fear*.


 ... financial fear maybe but financial illiteracy in a company that can offer a group RRSP ... an excuse? Maybe ian can confirm that.


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## ian (Jun 18, 2016)

I worked for a large multinational information technology company. Mostly knowledge workers. Our employer not only provided seminars on retirement but also financial management and preparation for retirement. Some of these seminars were virtual, others in person. Depended on location. The insurance company/investment firm made presentations as part of those presentations. Plus a follow up with written material.

As a senior manager I had access to much of the data from time to time, either directly or through HR. First off, as I recall participation was only about 40 percent in these seminars even though they were conducted at different times/days and even time zones to accomodate those who were travelling, with customers, on vacation..whatever.

We did get a mangement HR prestentation on pension plan participation and montitoring. Every year we had excess funds in that part of the budget because of he number of employees who did not participate. A five percent match may seem piddly to sum, but combine it with the ee five points and that is 10 a year. It adds up. Besides, a 5 point sheltered 'raise' is actually a little larger than 5 points. 

I must say that I was intially taken aback when I saw the take rates and the stats on how often ees in the plan actually accessed their account to review or to make changes. These stats were provided by the plan manager through our HR team. Naturally it was limited to stats...employees were not identified. The stats for Canada were similar to those in the US.

Years of this made me come to the conclusion that many people are not prepared for retirement or make poor financial choices simply because they are too darn lazy to spend 10 minutes doing basic research. They will happily spend hours on facebook or gaming, or hours on researching a TV or automobile. This is exactly why bank stock has been so attractive.....people take the easy way and let the bank do it for them (or to them as the case may be).


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## Beaver101 (Nov 14, 2011)

> Years of this made me come to the conclusion that many people are not prepared for retirement or make poor financial choices simply *because they are too darn lazy to spend 10 minutes doing basic research. They will happily spend hours on facebook or gaming, or hours on researching a TV or automobile*.


 ... that may be it but they can you blame them if they work in a large multinational *information technology *company. At least that's an excuse? 



> This is exactly why bank stock has been so attractive.....people take the easy way and let the bank do it for them (or to them as the case may be).


 ... I wouldn't be surprised this prevails in the financial sectors as well, starting with banks themselves ... eg. bank financial advisors (same GEN) ever talk with their clients as to how their financial planning is going? Ie. real life scenarios that clients can relate to? Most of the time, the planning involves in this or that recommended product(s).


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## CalgaryPotato (Mar 7, 2015)

ian said:


> The second stat that shocked me was how infrequently members a) bothered to even log into their investment accounts and b) even lower was the percentage of participants who actually adjusted their fund selections over time to respond to changing economic conditions/opportunities. Bottom line...the smart ones and the savvy investors will fare just fine-inside and outside of the program. The remainder of the participant will will just bounce along the road without doing much past their first enrollment, fund selection, and fund allocation.


I don't necessarily see not bouncing around between different funds to respond to economic changes as being a not savvy investor. The type of broad funds I've seen in those group plans are designed for long term buy and hold, and not particularly useful for using to take advantage of market shifts.

The reasons for changing the allocations in those plans should be more personal rather than market driven IMO.


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## twa2w (Mar 5, 2016)

If your company is very large then an insurance company group plan may provide a lower cost ( MER) selection of funds but usually this means a limited number of funds. Usually this is based on the number of employees expected to take up the offer and the average contribution. Or the management may decide to buy down the MER if the insurance company allows that option.
This could certainly provide lower MER's than the bank option but the selection is usualy limited.

As far as banks go, I can only speak to the RBC option and my info may be out of date but here is how it worked a few years ago.
Group RSP would be set up with a standard bank GRSP opened for all employees( that wanted it) with appropriate employee/employer contribution. This option gave full access to the suite of mutual funds available through the the bank. Company employees, if they wished, could opt to open a Direct Investing or an RBCDS account as well. For these people their money would roll through into their RBCDS or Direct investing account where they would have to invest in what they chose - stocks bonds etfs or funds.
Generally the rank and file took the standard RSP, while management opted for the self directed option. 

The ones that took the option of RBCDS or DI, got all their reporting from that source.

Normally once the group plan is agreed upon, the bank would set up a time or times to visit the company and an RBC employee would sit with each employee and set up the paper work and KYC. Usually about 15 min per employee. Subsequent hires or enrollments would require an emploee to visit the bank. Unless it was a very large company in which case other arrangements could be made.
TBH, many people in the standard option ended up in a balanced fund - conservative, moderate, or aggressive depending on their KYC.

Places like Edward Jones also will set up GRSP but this will depend on the individual office, and support may not be as strong as with an lnsurance or bank. Although advice may be better or worse depending on the advisor.


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## ian (Jun 18, 2016)

Well I certainly did. When the marked tanked in 07/08 we moved money from fixed into equities. Figured the time to buy was when everyone else was selling. We are far from being savvy investors. It was fairly obvious that our income fund was going to be taking a hit.

We moved from a pay for service investment advisor at our bank to a pay for service investment advisor outside the bank. What a world of difference in terms of cost, return, and most especially service/advice. It was day and night.

We are of the opinion that the only people who really care about our money is us. If we don't do it, pay some attention to it and do some basic reading, then the results will less than anticipated. It is like anything else...what you get out of it will depend on the effort that you put into it. Why on earth would I trust a bank advisor who is commissioned or paid on performance bonus any more than I would a new car salesperson? Their compensation packages have similarities. If you want to know how an employee or salesperson will act or treat you as a customer simply find out how they are compensated/rewarded/promoted.


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