Online portfolio manager Nest Wealth is widening its product shelf to become the first robo-adviser to offer group retirement savings plans for small to medium businesses in Canada.
On Tuesday, Nest Wealth announced the launch of “Nest Wealth at Work,” an online platform that offers small- to medium-sized businesses access to group registered retirement saving plans (RRSPs) for their employees.
Nest Wealth, in partnership with Vanguard Investments Canada Inc., Morneau Shepell Ltd. and Canadian Western Trust, will allow companies to offer their employees group RRSP plans with fees under 1 per cent of assets administered through the plan. That’s less than a third of the average cost an individual Canadian now pays to invest in a group RRSP, Randy Cass, founder and CEO of Nest Wealth, said in an interview.
The group RRSP plan is free for employers and does not charge an administration fee or monthly set-up fees. Already, more than 200 companies have registered for the platform since it opened during a soft launch at the beginning of the year.
“Typically, groups RRSPs have been a very onerous process for small to medium business with a lot of cumbersome paper work, and now we have turned that into an instantaneous digital process,” said Mr. Cass.
Once a business signs up for an account, employees are able to digitally enroll for a group RRSP within 30 minutes. Employees will then contribute directly into the plan via a payroll deduction; while companies are provided the option to set up an employer-matching plan online. Unlike retail robo-adviser offerings, which comprise a variety of exchanged-traded fund portfolios, the employee Group RRSP investment portfolio is made up entirely of Vanguard institutional funds, which lowers the overall cost.
Group retirement assets in Canada accounted for approximately $84-billion in 2016, reflecting about 43,000 plans, according to the Group Retirement Savings and Pensions Report by Strategic Insights. This was up from $53-billion five years earlier. Strategic Insights has forecast these assets to grow to $160-billion by 2026.
There are approximately 15 robo-advisers operating in the Canadian marketplace. Along with many of its peers, Nest Wealth has transformed its digital offering over the past four years.
In the past year alone, Investor Economics lists 22 announcements by online wealth platforms of changes to their existing platform, or joint ventures between the online platform and an investment firm.
Wealth management firms that once balked at the introduction of these fintech players are now seen partnering with digital platforms in order to optimize client accounts and keep costs low.
“Full service firms have recognized the synergies from bolting on a robo-advice digital model onto their existing wealth platforms, both to broaden the available client wealth options and in some cases to facilitate the shift to a fully digitalized wealth platform,” said Ian Russell, president of the Investment Industry Association of Canada in an industry note released on Tuesday.