Why Invest Through Your Employer?

We manage multiple Group RSP’s and Pension plans at our company, and I am often shocked at how many people are unaware of the benefits of having an Employer Sponsored plan available to them. It is very common for a conversation to include the statement “I invest through my Employer for my monthly matched contribution but I still have (fill in the blank dollar amount) RSP’s at my bank or mutual fund company.”

So that begs the question. Are you better off to leave your other plans separate from your employer plan, or should you consolidate them all into one plan through your work?
Let’s look at the benefits of investing through the employer.

1) Fees – The primary benefit of an Employer Sponsored Plan vis-a-vis your individual plan is the negotiated rate of your Investment Management Fees (IMF’s). Given that 90% of Fund managers do NOT outperform their respective indices net of fees, you would think investors would be very cognizant of the annual fees charged on their funds. In the retail investment world, your bank or mutual fund provider is not going to negotiate with you on your annual fees. Therefore, a good manager will charge between 2-3% per year for you to participate in their funds. You have no “purchasing power” and therefore are unable to demand a better rate. Your employer on the other hand, has been able to collectively package 50-1000 people (depending on size of company) together and go to the fund managers with a much larger piece of business and therefore “demand” a reduced price on the fees. In most cases, fees range in the 1% to 1.75% annual. This represents significant savings over time, and will bring incremental value to your retirement assets.

2) Ease of Reporting – Rather than managing multiple statements, you now can track all your retirement assets on one report, and not have to worry about coordinating multiple institutions statements every month.

3) Termination/Retirement from Employer – What if I leave my job?? You have 2 options.

1) Transfer it into an individual account with the company that manages the employer’s funds. For example, if Manulife is handling all the employees for a company, they offer an individual account you can transfer to if you leave said company. Obviously you do NOT get the fee guide of being an employee but at least you have a very seamless option to transfer to.

2) Transfer it out to a different institution. Another very easy option. We would set up a retail account with another provider and transfer it out of your employer on your behalf.

“Jordan, I never realized. Now what?”

I am glad you asked. Very easy to transition. All we need is a copy of a statement from your outside provider so we can compare fees to your existing employer sponsored plan. When looking side by side, you can see whether it makes sense to keep separate or to consolidate into your employer plan. If it makes sense to transfer, we will use a CRA form T2151 or T2033 and with your signature consolidate the amounts. Very easy and seamless. Contact our office at 604.539.9585 or by email at jordan@wiffen.com to discuss further.