Right now, Canadians have more than $1 trillion in individual retirement savings.

But Keith Ambachtsheer, director of the Rotman International Centre for Pension Management, is unhappy that most of it is in retail mutual funds.

Read: Four in 10 Canadians aren’t retiring on time

“There’s a 30-basis-point solution for these people,” he said at Rotman School of Management (in partnership with AIMA and PMAC) luncheon in Toronto. He asserts asymmetric information prevents clients from switching to passive, low-cost investments.

In response to a question about the value of advice, he concedes people need guidance on what to do while working in order to prepare for post-work years. But he says it’s “fundamentally wrong” that advisors earn trailers on investment products, and he wants Canada to ban embedded commissions like the U.K. and Australia.

Proposed retirement solution for Canadians

Ambachtsheer says 15% of Canadians will experience a significant drop in their standards of living when they retire due to inadequate savings. And it gets worse for those aged 25 to 35 right now: 40% will likely see a major drop.

Read: Understanding the pension income tax credit

And neither Big CPP nor PRPPs will encourage sufficient savings, he says. In particular, he calls Big CPP a “one-size-fits-all solution for a targeted problem,” adding the next generation would be forced to fund any shortfall due to faulty assumptions.

Instead, Ambachtsheer, who’s advising Ontario premier Kathleen Wynne on retirement solutions, proposes a Canada Supplementary Pension Plan. (The CD Howe Institute first published this plan in 2008.)

It has four components:

1. All employers who don’t have an employee retirement plan will have to enroll in CSPP. Employees could opt out individually.

2. The CSPP contribution will be 6% of pay, split between employee and employer. He says this should lead to 60% income replacement for the middle class in retirement.

3. There would be a default age-based investment policy, and the possibility for annuitization.

4. It would be run by a “great pension organization.”

One audience member asked if education would help sway young people to save more now.

“Education only gets you so far,” he responds, since young people are overly optimistic about their future ability to earn and save. He adds we need to tackle this fallacy instead.

While he doesn’t advocate mandating retirement savings, he wants it to become difficult not to save. For instance, the opt-out rate for Britain’s retirement savings program, NEST, is a mere 8%.

Read: What can Canada learn from Australia’s pension reforms?

Originally published on Advisor.ca
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So Mr. Ambachtsheer is advising Kathleen Winn – “fee free”? This guy talks like it’s the low trailer fee that has cost the investor good results. I only charge clients the trailer fee – no up front – Deferred Sales Charge or administrative fees what so-ever. I explain to clients this means that when their account goes up I earn more and if the account goes down I earn less. I don’t see how anyone would consider that excessive or unfair. Keep in mind I DON’T receive 100% of the trailer fee only a portion of it. I have consistently beat the market over the years with portfolios of guaranteed Segregated Funds (which by the way – have lower MERs than 70% of their peer Mutual funds. Perhaps Mr. Ambachtsheer thinks we should just pack our bags and leave the industry. That way Banks could have Customer Service reps sell their mutual funds to clients right at the teller’s window. That would certainly save a few basis points and be so much better for the client. Over and above that I have helped clients with collecting the death benefit from an insurance company, estate issues, the disability tax credit, getting their CPP set an paying out, getting their OAS, financial planning, first time home purchases etc. All I have ever charged was the trailer on the Seg funds why do some people find that unreasonable?

Saturday, February 22 @ 6:39 am //////


Investors have a choice whether they purchase mutual funds with embedded compensation or not. As an employer, I don’t have a choice: I must remit 7.6% of my employees’ earnings for EI and CPP on top of their own contributions. The employees don’t have a choice to opt out of a CPP with a return equivalent to 2-3% and instead put the money into a 30 basis point solution. As a taxpayer, I don’t have a choice about subsidizing universities actively hostile to the private sector. Mr. Ambachtsheer proposes another obligatory program to combat a non-existent problem – since senior poverty in Canada is at an all-time low and falling.
Sure. Sign me up.

Thursday, February 20 @ 5:55 pm //////


In all due respect to Keith Ambachtsheer, director of the Rotman International Centre for Pension Management, not everyone loves to worry about investing. Many have full time jobs, a family, a hobby, travel, maybe a part time job, etc – they do not need the added stress of good money management.
An index is just a tool. How that tool is used decides on success or failure. Emotionally we are net yet equipped to handle the emotional pressures of losses in the markets. We hate seeing losses.
Does Keith Ambachtsheer, director of the Rotman International Centre for Pension Management, have an issue just with embedded fees or fees in general? The industry is coming with full disclosures, fees are dropping so I assume his issue is with paying any fees. Then lets be fair…I would like to add that with the internet and the access of free information unheard of even just ten years ago, why are school university tuition fees not close to zero? Fund fees and index options have lowered investment costs but professor fees and salaries and benefits have not come down one penny over last 20 years. Now that is a big drain on all of society. Lets teach students how to go out and get the information and how to use it – it is all there and most of it is FREE.

Thursday, February 20 @ 5:22 pm //////


That’s sweet. A guy who makes his living in the public tough criticizing free enterprise.. How cute, but summarily stupid.

Thursday, February 20 @ 4:13 pm //////

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