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Get in on group RRSPs

More companies want to help Canadians save, and that presents a big opportunity for advisors.


Date: December 2,2015

It’s no secret that Canadians need help saving for retirement. A September study, conducted by the Canadian Payroll Association, found that 76 per cent of working Canadians have put aside less than a quarter of what they will need in retirement.

Consequently, many Canadians are aware of the need to start saving more, and they’re asking their employers for help, says Shane Ayres, Vice-President of Institutional Distribution at Fidelity Investments Canada.

One way that companies are stepping up is by offering group RRSP plans, which work in a similar way to defined contribution plans, in that the onus is on the individual to make security selections from a predetermined set of investment options. In some cases employers will offer matching contributions.

As interest in these plans increases, there’s an opportunity for advisors to expand their business, since many companies need help setting up group RRSPs, says Jeremy Racicot, a CFP with Burlington, Ontario-based The Bay West Group.

“Not many advisors prospect for this type of business, so there is potentially less competition to get in the door,” he says.

The companies that need help the most in developing an employee savings plan are typically small to medium-sized operations, says Mr. Ayres. He also points out that small businesses (typically from five to 100 employees) have minimum size and contribution levels for group plans. Therefore, it can be tough to generate revenue with companies on the smaller end.

Before advisors can dive into an employer sponsored plan, they’ll need to educate themselves on the company itself, looking at its budget and what’s available to match and support RRSPs.

The advisor will also need to develop a trustworthy relationship with the company’s owner and prepare a well-researched pitch.

One area to emphasize is fees, says Jim Yih, personal finance expert with He points out that group RRSP fees tend to be much lower because of the buying power of a group, so the promise of reduced fees and, therefore, potentially higher long-term returns, is a strong selling point.

The pitching and relationship-building process can be time-consuming, says Mr. Racicot, but the payoff could be worth it. First of all, you may end up managing a large base of assets. About 10 per cent of his business is related to group RRSPs, but he expects that to grow over time.

As well, by managing group assets, advisors gain access to individuals that they wouldn’t normally interact with, says Mr. Ayres. As a result, when an employee retires and moves their employer sponsored plan into an individual retirement account, they could move their assets to that trusted advisor who helped them throughout their career.

Getting into the group RRSP business can also help advisors diversify their business. As most advisors can attest, it can be difficult to get clients to set money aside for retirement, but with built-in contributions, which can increase as staff advance and their wages increase, that worry is diminished, says Mr. Ayres. If the asset portion of a business is taken care of, advisors can focus on other parts of their business, such as education, planning and cross-selling, he says.

There are a couple of good ways to get group RRSP clients, says Mr. Racicot. One way is to talk to high-net-worth clients, many of whom are likely business owners or executives. They may be looking for new ways to help their employees save.

Advisors who do group insurance programs for corporate clients may have an in, too, says Mr. Racicot. The group RRSP offerings can be complementary to group insurance, he says.

Here’s another reason to offer group RRSPs: The more you can offer your clients, especially the corporate ones, the less likely they’ll be to switch to someone else.

“Take care of as many needs for your business clients as possible, and then over time you become their trusted advisor,” says Mr. Racicot. “Then you have less [to worry about] if a competing advisor opens up a relationship in another capacity.”

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