There are four main companies that administer group RRSP plans: insurance companies, mutual fund companies, banks and self-directed trustees. The biggest players in the group RRSP market are the insurance companies as they have been doing it the longest. Combined, Sun Life, Great West Life, Standard Life and Manulife have over 70% of the total market share. The insurance companies are also key players in the non-financial group benefit market. Each group and strengths and weaknesses so choose wisely.
Insurance companies really understand products for a mass group of people. They have been in the benefit business the longest and the Group RRSP or Pension is simply a natural extension of the life, health and dental benefits they provide.
Insurance companies have very competitive plans where there is no front or back end loading like the mutual fund industry. Their plans are usually “no-load” and they have much lower management fees in their group offerings than the mutual fund companies.
Mutual Fund Companies
Mutual fund companies have group RRSP products but from my experience, their administration is not as strong as the insurance companies. The insurance companies have just been at it for that much longer.
Most mutual fund companies offer the same products as their retail offerings so there is no fee breaks for a group of employees.
What can I say about the banks? They can do it all! Credit cards, mortgages, RRSPs, investments, banking, etc. Of course they can provide Group RRSP plans but can they do it well?
Their fees are typically lower than mutual fund companies but I cannot speak to administration or service. If their service for group RRSPs, is like other departments, then plan to spend a lot of time using 1800 numbers and bouncing from department to department.
Self-directed plans will give maximum flexibility. Essentially, they can invest in a wide range of investments like stock, mutual funds, bonds and GICs. There is a fee to self-direct that can be picked up by the employer or passed onto the employee. These plans tend to be a little more complicated and with so much investment choice, it is important to have a good advisor or broker. Self-directed plans are better suited for larger account sizes. I love self-directed RRSPs but I am not sure they are best suited as a group product.
My two cents
There are pros and cons to all providers so my advice is very simple – ALWAYS SHOP THE MARKET! As a fierce independent thinker, I believe it is in every companies best interest when implementing a Group Retirement or even benefit plan to get quotes from at least 3 different companies. Only then will you really be able to know if you are getting value. I always encourage shopping from at least one big company, one smaller company and another for comparisons.
You would probably shop around when buying clothes or a TV or a house so why wouldn’t you also shop something as important as a benefit plan. If you think about it, your service provider is your partner in providing benefits. Choose that partner carefully.