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© Copyright 2000 Rogers Media. The following article first appeared in the March 2001 edition of
BENEFITS CANADA magazine.
Insights
Contrarian views, news and international intrigue
By Andrea Davis
Moral investing
Socially responsible investments in Canada account for nearly $50 billion, and industry experts say that
although it's a small niche of the investment market, it's a growing sector.
"Unions are moving beyond collective bargaining issues into wider social issues, and the investment of
union trusteed pension funds is one of the issues that we're seeing more interest in," says Eugene Ellmen,
executive director of the Social Investment Organization (SIO) in Toronto, which conducted its first survey
on social investments last December.
According to SIO's survey, assets invested using social and ethical screens represent 3.2%, or $49.9
billion, of the retail mutual fund and institutional investment markets. Institutional assets invested
using social or environmental screens account for $27.2 billion of the total. While assets in the mutual
fund sector as a whole have grown by about 30% over the last two years, assets in ethical and socially
responsible mutual funds have grown by about 75%.
Patrick Walsh, president of SEI Investments in Toronto, is also optimistic about the growth potential of
ethical funds. However, he says institutional investors' interest in ethical funds is currently quite low,
compared to endowments and foundations. One of the challenges for pension funds, he says, is determining
what their policies will be for the long term. "This is very clearly an area where the same solution is not
suitable for all investors," says Walsh.
Michael Mazzuca, a partner with Toronto-based law firm Koskie Minsky, advises interested plan
administrators to seek professional advice "to ensure that implementing an ethical investment strategy will
not have a detrimental impact on the fund's rate of return."
"The attitude [on the institutional side] generally in the past was that ethical investing or socially
directed investing, was basically not permissible or not allowed," he says. "That attitude is continually
changing to an acceptance of some ethical investments as long as they comply with the plan administrators'
overall duties to the plan members."
--Young Um
Taking care of employees
Some plan sponsors will go to any lengths to retain valuable employees--they'll even pay for someone to go
pick up their groceries. That's what MDS Sciex did last year when it hired Concierge Connection, a company
that provides concierge services to employers and their employees.
The Etobicoke, Ont.-based concierge service will pick up and deliver dry cleaning, go for groceries, mail
packages and even renew passports and driver's licences. Employees pay nothing for the service, other than
what they would normally pay for their groceries, dry cleaning or postage. The concierge will also provide
information services for employees going on a trip, for example, who want details about their destination,
or for an employee who's looking for swimming lessons in his neighbourhood for his child.
Co-founders Molly Schneeberg and Morgan Marlowe created the company two years ago after doing market
research and realizing that while concierge services are an up-and-coming benefit in the U.S., there was
little serving the Canadian market. The typical cost for the services of a concierge for one day a week
ranges from $240 to $300.
"Relative to other benefits, the cost is not very high and it's effective in terms of the visibility of
it," says Schneeberg, adding that even employees at MDS Sciex who were at first skeptical of the service
are now active users. "The people there now can't believe how they lived without it."
For plan sponsors who struggle with communicating to plan members about benefits, concierge services
provide a tangible, immediate payback.
Health online
More than half of your plan members (54%) use the Internet from home to seek out medical and health
information, an increase of 26% since 1998.
SOURCE: Statistics Canada
Guarding against violence
To mitigate the effects of violence in society, including in the workplace, a U.S.-based company is
offering a novel type of insurance to protect employers. The new product provides liability protection for
willful and intentional violent acts. It also offers business interruption coverage, a crisis fund and
death and medical benefits for innocent third parties and employees on insured premises.
"There is some disbelief in the market that someone would offer coverage like this. But the main response
from risk managers has been good once they've realized the scope of the coverage," says Donald Cleveland,
managing director of Market Place Resources, the brokerage arm of Meadowbrook Insurance Group. That firm is
working with A++ XV Carrier, an international carrier, to provide the coverage.
Cleveland says that many risk managers and others handling insurance believe their general liability covers
against this type of liability, when in fact it doesn't.
--Young Um
Focus
Do you know where your costs are?
By Terry Li
Investment management fees aren't the only expense for your company's pension plan.
Pension plan sponsors have a fiduciary duty to ensure that the operating costs they incur are appropriate
and reasonable. Part of this process should involve an examination of where costs are allocated. While most
plan sponsors focus mainly on investment management fees because they represent the largest cost category,
many tend to forget about other equally important costs, which include brokerage, asset consulting, pension
plan consulting, pension administration, as well as custodial and audit fees.
Plan sponsors pay an average of 20 to 30 basis points of their total plan assets to investment managers,
depending on the size of the plan. This accounts for roughly 45% to 60% of the total fees paid to operate a
pension plan (see "Eating up the pie," right). In aggregate, the other cost categories account for
approximately 40% to 55% of the total fees paid to run a plan. As part of their fiduciary duty, plan
sponsors must negotiate a fair price from all service providers agreeing to help manage the plan, including
consultants, actuaries, custodians, legal counsel, performance measurers and auditors.
Terry Li is an investment marketing specialist with SEI Investments in Toronto. tli@seic.com.
Eating up the pie
Of all the costs associated with running a pension plan, investment management fees eat up the biggest
piece (57%) of the pie. Next in line are pension administration fees, which account for 14% of costs.
SOURCE: SEI Investments Fee Study
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