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© Copyright 2000 Rogers Media. The following article first appeared in the December 2000 edition of
BENEFITS CANADA magazine.
Straight talk
Defined contribution plan members speak out about what they want from their plan sponsors. Are
employers listening?
By Lizabeth Pirstl
Defined contribution (DC) plan members are looking for financial advice, more investment options and more
information in general about their plans, says a new survey of plan members.
Some of the most revealing information in the survey, conducted by Trimark Investments (recently merged
with AIM Funds Management Inc.) in partnership with major DC plan providers, relates to where respondents
hold most of their assets, their views regarding professional advice and their retirement expectations.
The survey focuses exclusively on the attitudes and opinions of DC plan members with respect to choice,
responsibility and education. AIM Funds (formerly Trimark Investments), in partnership with Canada Life,
Clarica, Sun Life Financial, Great-West/London Life and Imperial Life Financial and Desjardins-Laurentian
Life Assurance, polled 1,335 DC plan members in 24 companies representing 11 industries.
The study reveals that employees who participate in a DC plan through their employer actually hold most of
their assets in a personal registered retirement savings plan (RRSP) rather than their company plan.
Forty-four per cent of respondents say that most of their money is invested in personal RRSPs, while only
30% hold the majority of their assets in their company plan. Employees with higher incomes and more assets
generally hold more of their assets outside of company plans.
Today there seems to be as many ways to invest as there are investment options. Investors are using a
variety of plans and services to manage their investments. This is especially true for people with higher
incomes and increased assets.
The study illustrates that while a large proportion of plan members on the high end of the asset scale
consider themselves knowledgeable about investing and monitor stock markets regularly, almost half of plan
members with $100,000 or more in assets admit that their investment portfolio has become too complicated
for them to manage on their own.
PLAN MEMBER SATISFACTION
Overall, 80% of the respondents say they are either very satisfied or somewhat satisfied with their
company's DC plan. Forty-five per cent have even contributed additional funds to their plan during the past
year.
"Most viewed the characteristics of a company retirement plan as an advantage. However, there is room to
educate plan members on the benefits of their group plans," says Bruce Winch, vice-president, sales
alliances with AIM Funds Management Inc. in Toronto.
The survey also found there's room for improvement in some areas. Two common criticisms were a lack of
choice among investments and a lack of information. About one in five (22%) plan members say they have too
few investment choices within their company's retirement plan. As the member's level of education and
assets increase, so does their desire for investment options.
Forty per cent of plan members feel that they don't receive enough information to help them choose the
right investments. That sentiment is strongest among plan members in the 18-to-34 age group, where 51%
would like more information.
While it might be easy to increase the numbers of products offered to members, plan sponsors need to keep
in mind that with more choice comes an increased need for education. With more choice, it's even more
important that sponsors ensure that their members have access to all the tools and resources they require
to make informed decisions.
When asked how their company plan could be improved, about a quarter of respondents had no suggestions. Of
those who had recommendations, personalized advice was one of the most requested items.
Over 40% of plan members say that if they had the option to consult with an investment professional for
information or advice, they were either likely or very likely to pay for this added service. Younger plan
members with higher levels of education say that they are also likely to use retirement planning tools if
they are provided to them by means of a Web site or computer disk/CD.
INFORMATION AND ADVICE
In general, the survey found that DC plan members want more--specifically more information and more advice.
For sponsors considering ways to improve their plans, it's important to review the pros and cons of any new
initiatives such as expanding product offerings or providing access to professional advice.
Investors today are more market savvy than ever--but they still value professional advice when it comes to
their personal savings and investments. Reflecting the need for advice, 35% of plan members indicate they
have a professionally prepared financial plan.
"The survey confirms that defined contribution plan investors are hungry for investment information through
tools such as access to top quality financial advice," says Winch. "The companies registering the highest
plan member satisfaction levels in the future will have made it a priority to provide timely investment
advice to all members."
Sixty-seven per cent of respondents say they usually seek professional advice before making decisions about
their personal savings and investments, while 63% say they can never seem to find enough time to give their
personal savings and investments the attention they need.
The desire for professional advice increases with asset level. Almost half of plan members with $100,000 or
more in assets admit to needing some level of guidance in managing their portfolio. Among members in this
asset category, 24% use a full service stockbroker and 17% have a discount brokerage account.
Almost half of DC plan members say they would like to be able to turn to an investment professional for
advice about their retirement plan.
"We're seeing changing needs in the company retirement plan arena, a desire for advice that in the past was
not present in this channel. Plan members recognize the value of professional advice and they want access
to it through their company plans," says Winch.
Providing advice to plan members is a hot issue these days. While many companies are recognizing the need
to provide employees with professional financial advice, it's not an area to jump into too quickly. No
corners should be cut when researching and selecting a provider.
For most plan members, their company retirement plan is part of their overall financial plan. Thirty per
cent of respondents say they expect their company retirement plan to be their most important source of
retirement income, while 42% say their personal RRSPs will provide the bulk of their retirement income.
In general, DC plan members are optimistic about their retirement. The average age at which they expect to
retire is 58.
More than half of the plan members who are under 35 believe they will be able to retire by the time they
are 55. Almost no respondents believe they will continue to work past the age of 65.
Lizabeth Pirstl is a corporate writer with AIM Funds Management Inc. in Toronto. bruce_winch@aimfunds.ca.
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