DC expertise and flexible platforms combine to significantly reduce pension fees
Tribal Wi-Chi-Way-Win Capital Corporation (TWCC) is an Aboriginal financial institution that provides business development resources for aboriginal people and short-term loans to individuals, and operates a national call centre through a federal government contract. TWCC Insurance Partners LP, or TIPI, was established to provide pension and benefit plans for all Aboriginal organizations, tailored to the unique needs of Aboriginal plan participants and with a focus on returning benefits to members.
TIPI’s initial efforts were centred on creating one pension plan for its member organizations. What sounded easy in theory was harder to accomplish. There were hundreds of small, Aboriginal defined contribution pension plans, each covering 5-2,000+ participants. All of the plans were practically identical — very generic — with high fees.
For a number of reasons, historically, nearly all First Nations’ pension plans were separately registered. As expected, with over 500 plans, the aforementioned high fees were not producing the best outcomes. The challenge was to create a plan that was designed to better meet Aboriginal needs, would provide opportunities for Aboriginal communities, and would reduce fees by realizing economies of scale.
TIPI consulted with a number of providers, but ultimately collaborated with Morneau Shepell to realize its vision. Chris Maxfield, Vice-President at TIPI, says that it was Morneau Shepell’s “immediate buy-in for the concept and ‘can do’ attitude” that made them the ideal partner. Nathan Ballantyne, TWCC’s Vice-President of Finance and Corporate Development and TIPI President, agrees that working with Morneau Shepell has been even better than anticipated:
“I was not expecting a corporate giant like Morneau Shepell to be interested in new ways of doing things and thinking outside the box. I’ve been pleasantly surprised.”
Morneau Shepell realized that substantial savings and benefits could be generated if all the individual pension plans had common recordkeeping, investment, custodial, and communication platforms. Morneau Shepell’s highly customizable DC administrative solutions were the perfect platform to manage member records, collect contributions, and provide the reporting, disclosure, and tools needed. The same was true of the communication platform, with its editable online areas that allowed for key messages to be adapted to better suit plan participant needs, in terms of both language and writing style. “We were very pleased we were given the opportunity to craft our messages using terms that would resonate with our plan members.”
Developing the right kind of investment platform with custom investment portfolios was just as critical. One specific request — for target date funds (TDFs), given the limited financial literacy of some participants — was especially important. Customized TDFs had to be developed for this group in recognition of its unique demographics with respect to retirement planning and life expectancy.
“On a scale of 1 to 10, Morneau Shepell scores an 11. The whole team bought into the plan right from the business concept, fully embracing the heart of what TIPI is trying to do. That’s the best kind of partner you can have.”
Vice-President and Director of Member Services, TIPI
Morneau Shepell was able to do so utilizing both their skills in designing investment solutions and their highly flexible portfolio management capabilities.
The first transfer of pension assets took place in December 2012 and, within six months, approximately $40-50 million in assets were committed to the program. TIPI’s strategy is to continue to grow the plan substantially and, in time, develop a group employee benefits program for members that will also achieve fee savings through economies of scale. Significant pension fee reductions have already been achieved, and with the savings being passed on directly to member accounts, the program will deliver much higher levels of retirement savings for First Nations people. Ballantyne also appreciates the fact that Morneau Shepell’s team has helped to frame the TIPI message so that potential customers gain an appreciation of what differentiates the TIPI plan from other plans.
“Morneau Shepell provides us with a huge support network that we can rely on. That’s been particularly useful in enabling us to tell our story to a group that has been largely excluded from financial services.”
“Morneau Shepell is working with TIPI and TWCC to change the status quo for First Nations people.”
Vice-President of Finance and Corporate Development, TWCC
Morneau Shepell also worked with TIPI to achieve one other very important outcome: employment opportunities for Aboriginal people. The service centre is managed primarily by community members, and other careers in finance have been created. The TIPI plan is clearly one that provides benefits that go even beyond customized retirement savings programs for participants.