Thanks to recent advances in technology, there are new options available for employers who want to offer cost-effective, high performing group retirement plans to their employees. Most business owners and even some plan brokers are unaware of these options. Here are a few things that you might want to consider.
Financial Technology is Evolving … Rapidly!
Over the past couple of years, Financial Technology (otherwise known as FinTech) has absolutely exploded in capability and growth. This has given rise to many new options available to business owners who want to deliver a better benefits and retirement plan to their employees, all at a lower price.In this article we’ll review a few of the new options available and how they benefit both the employer and employees.
Buggy Whips and Self-Driving Cars
When students go through finance school, one of the earliest lessons taught is about the plight of the buggy whip makers.Buggy whips, used to motivate the horses harnessed to wagons and carriages, quickly became obsolete when automobiles appeared in the late 1800’s. These buggy whip makers found themselves on the wrong side of history as they missed the transportation revolution, declaring it a fad. We all know how well that turned out for the buggy whip manufacturing lobby.Fundamentally, group benefits and retirement savings plans have not changed very much over the past 50 years. Other than some extra bells and whistles, the same benefits and retirement plans that existed for your grandparents remained relatively unchanged, with very few alternatives available. Until now.Just like buggy whips were made obsolete by automobiles, and automobiles will soon give way to self-driving cars, the benefit and retirement plans of yesterday will become a curious footnote in history.Perhaps finance students in the not-too-distant future will learn about the undoing of traditional benefit and retirement plans in their 1st year text books.Here are some of the major improvements to benefit and retirement plans that have been made possible by advances in FinTech, and how you can benefit right now.
Financial Advice by Video & Remote Presentation
Internet connections are now solidly reliable, fast and secure. This has allowed leading benefit and pension consultants to offer advice, reviews and group presentations to both employers and employees anywhere, at any time. This is a more efficient use of time for everyone, but more importantly it allows for archiving and replays so that both employers and employees can watch or rewatch an educational presentation at their convenience. This can be done easily on any device, whether at home, work, or anywhere else on the planet.For example, you could sit at home on a Saturday afternoon and watch a recorded Q&A session about your retirement plan on your mobile phone, with full video of the presentation and interactions from your peers that were recorded earlier that week.That’s a big change from waiting on a 1-800 number.
Exchange Traded Index Funds
Did you know it’s possible to buy every stock on the Toronto Stock Exchange, all at the same time and at an ultra low cost (as in fractions of a percent)? That’s an example of an Exchange Traded Index Fund.The big advantage is that your investments will track the performance of the whole market without paying a money manager to try and make bets. Most of the time these bets are wrong and end up costing the investor money anyway.Exchange Traded Funds (ETFs) have been around for a while now and have attracted Trillions of dollars in assets (yes, quite literally). However, many company plans simply don’t offer these investments as an option to their employees. Without an active pension consultant on the case, group retirement plans don’t get reviewed in enough detail to consider adding ETFs as an option in the group plan.Maybe it’s time to take a look.
Target Date Funds
Much like Exchange Traded Funds, Target Date Funds have been around for a while. However, many plans and employees still aren’t taking advantage of this automatic rebalancing technology.A target date fund is where the employee simply selects the investment fund for his or her investments that most closely matches their target retirement date.For example, if someone were retiring in 2035, they would select the Target Date 2035 investment fund.That way as the employee approaches retirement, their fund automatically changes from a growth orientation to a capital preservation orientation. This helps protect their investment capital for retirement when it’s most important to them.As an employer, you can even set a Target Date Fund as the default selection for your employees so they don’t have to do anything. They will enjoy the benefits of a fully managed and automatic investment, and as the employer you get to enjoy the fact that you did your best due diligence for your employee.
Apps & Online Investment Services
Over the past 24 months, the financial services industry has seen the rise of apps and online investment services that offer low fees and high levels of service for individual investors. What many people don’t know is that this same offer is available for Group Retirement Savings Plans through select pension consultants.Modern pension consulting companies are rapidly adopting this model because it offers the best of all worlds.
The fees are low, the service is excellent, and both employers and employees get an instant window into investment performance through an app on their phone, tablet or computer.This is a far cry from asking your employees to find a babysitter and take time off work so they can get down to a bank branch and ask a sales rep to put their financial details into an old computer.Some banks even still list a meeting with their financial sales reps in the branch as an advantage to their Group RSPs!Buggy whips indeed.
Next Steps …
This article pointed out a short sample of the new services that have been made possible by modern and rapidly advancing financial technology.
It’s kind of like how cell phones used to be huge bricks that cost a fortune and couldn’t hold a charge for more than a few hours. Now we have the most awesome mobile devices in our pockets that make the first cell phones look archaic.One day we will look back on the old benefit and group retirement plans like we do the brick cell phones, as we’re cruising around with financial advice in our pockets that’s available at the touch of a button.We’re on a mission to help 1,000,000 Canadian retire better by harnessing the greatest advances in financial technology.Click here if you would like a free review of your company’s benefit and group retirement plans to help your employees move to a brighter future.