Group Retirement with Brian McClennon | E034

Rewarding your staff by helping them plan for retirement.

In this episode of Financial Planning for Canadian Business Owners, Jason Pereira, award-winning financial planner, university lecturer, and writer, interviews Brian McClennon, CEO of Link Investment Management. Brian and Jason discuss the plethora of digital investment options that Link provides to employers for their employees. 

Episode Highlights: 

● 1:00 – Brain McClennon introduces Link and what services it provides. 

● 1:55 – What is the motivation for employers to set up one of the financial plans that Link provides? 

● 3:10 – Brian talks about what is involved with the Group RSP and how Link implements this plan. 

● 7:25 – What are the obligations that an employer has to the Group RSP plan? 

● 12:37 – Employers need to make sure plans are suitable for employees at different stages in their careers and lives. 

● 15:40 – How are Contribution Pension Plans different from Group RSP in terms of employer obligation? 

● 19:32 – People make the mistake of treating retirement funds like bank accounts. 

● 20:40 – What is a Multi-Employer DC plan and how does it work? 

● 22:54 – Brian breaks down Group Tax-Free Savings Accounts. 

● 24:00 – Differed-Profit sharing plan has similarities to the DC Plan and the Group RSP. 

● 25:35 – How do Employee-Share Purchase plans work and how does Link facilitate them? 

● 27:44 – Brian explains Health Spending Accounts (HSA). 

3 Key Points 

1. Link provides a variety of digital financial plans that employers implement for the benefit of their employees. 

2. Link offers 57 different Group RSP portfolios and emphasizes that employers assign portfolios based on suitability for employees rather than letting the employees choose for themselves. 

3. Multi-Employer DC pension plans lock people in to help them avoid making the mistake of treating it as a bank account when it is really a retirement fund. 

Tweetable Quotes:

● “I’m of the opinion that the entire group space is a bit of a mess. There are obligations that an employer has that oftentimes aren’t paid enough attention to and that potentially introduces liability.” – Jason Pereira 

● “The suitability of the investments for the employees are really important.” – Brian McClennon 

● “One thing that Link has done that is unique is we are both the administrator of and the sponsor of a Multi-Empoyer DC pension plan.” – Brian McClennon 

● “When you can’t touch it, you can’t touch it. It just has to be there until retirement, right?” – Jason Pereira 

● “Through the platform, we’ve driven efficiencies to scale this and roll this out and administer it on an ongoing basis, very effectively.” – Brain McClennon 

Resources Mentioned: 

● Facebook – Jason Pereira’s Facebook 

● LinkedIn – Jason Pereira’s LinkedIn 

● Woodgate.com – Sponsor 

● FintechImpact.co – Website for Fintech Impact 

● jasonpereira.ca – Jason Pereira’s Website 

● Lim.solutions – Link Investment Management 

● LinkedIn – Brian McClennon’s LinkedIn 

● brian@lim.solutions – Brian McClennon’s email

Transcript:

Producer: Welcome to the Financial Planning for Canadian Business Owners podcast. You will hear about industry insights with award-winning financial planner and entrepreneur, Jason Pereira. Through the interviews with different experts, with their stories and advice, you will learn how you can navigate the challenges of being an entrepreneur, plan for success, and make the most of your business and life. And now, your host, Jason Pereira.

Jason Pereira:Hello and welcome to Financial Planning for Canadian Business Owners. Today on the show, I have Brian McClennon, CEO of Link Investment Management. I brought Brian on the show to specifically talk about different solutions for employers when looking to reward your employees with different savings plans and retirement options. With that, here's my interview with Brian. Well, Brian, how are you doing?

Brian McClennon:I'm great, Jason. Thanks for having me.

Jason Pereira: Brian, tell us about what it is you do over at Link.

Brian McClennon:Yeah, absolutely happy to do that. Link Investment Management is a platform and a company in services that manage employer-sponsored compensation plans. If you are considering everything outside of a salary that you might get as a form of compensation from an employer, Link manages a number of these compensation plans. We break them down into three buckets, the first being group savings plans and retirement plans, the second being equity plans, and then the last one is health benefit plans.

Brian McClennon: We consolidate and aggregate all these offerings onto a single dashboard and single platform, and the company services to administer and support those plans.

Jason Pereira: Excellent. We have a number of investment platforms here. We're going to talk about them all individually, just one off at a time. But before we get there, let's talk just generally, like what is the motivation for an employer to basically set up one of these plans or any of them for that matter?

Brian McClennon: Yeah, absolutely. I've heard you mention this on your podcast with other guests, the number of times employers are looking to attract, reward, and retain. They're looking to attract the best talent, retain them, and reward them for their service, and motivate them to be best team and employees that they can. So that's a key motivation of employers. Typically, what we see in the genesis of a company, startups, if we take them into account or consideration, is they get up and running. Probably one of the first things that they need to do is get some sort of payroll set up.

Brian McClennon: They look at some HR management, and then they would look at a health benefit. Once they reach a certain level of maturity... That doesn't necessarily correlate to the number of employees, but perhaps more on how they need to compete for the top talent. They'll start to introduce other benefits as well. And typically what you'll see is group retirement savings and equity plans as part of overall compensation for the employee.

Jason Pereira: Excellent. Let's talk about each of these plans, and we'll talk about the onboarding at the end of it. There's a number of them because each of them is a little bit... They're similar but different. Let's start off with the very simple group registered retirement savings plan, so group RSP. Basically, talk about what that looks like and talk about implementation.

Brian McClennon: Yeah. Absolutely. I'll give you a tiny little bit of background here, the genesis of Link. We're headquartered in Calgary, Alberta. Another significant FinTech in Calgary is Solium Capital. Solium last year sold to Morgan Stanley. I was involved as an outside consultant with Solium for a little while, and there were some other individuals that were involved with the company as well. The genesis of Link started in 2015, where we saw what Solium did in the success of outsource to equity plans.

Brian McClennon:And then we looked at the space and we saw that in group retirement savings space, there was a significant opportunity to develop further efficiencies in the offering of those plans. So whether that was the ongoing administration, onboarding digitally, presenting dashboards to member, being able to communicate with members. We saw a gap there and an opportunity there. So one of our first products that we launched was the group RSP.

Brian McClennon:From an employer's perspective, what were they looking to accomplish in that offering? Obviously, one is the attract, reward, retain. They need to offer this benefit, but it needs to be simple and straightforward. Through what we've built, we make it very simple and very easy for members to onboard. The user experience is great. And for administrators to run these plans, that's an excellent experience as well with a very robust dashboard back off office function. That's available to the plan sponsor, but really, they're looking to-

Jason Pereira: Let me stop there. Let me just say. I mean, the old way of doing things was incredibly tedious and laborsome. Because, I mean, let's imagine a large scale enterprise that has over a hundred employees. That's setting up at least a hundred different accounts. That is a lot of paperwork that is involved. Back in the day... Not only is there a lot of paperwork, there's a lot of room for error when it comes to paperwork. So digitizing that entire experience is a huge, huge benefit to efficiency there. Okay. Let's talk about specifically what's involved with... Tell us about the group RSP, what's involved there.

Brian McClennon: Yeah. Essentially, we will work with the employer, with the sponsor, to understand what their needs are. What are you trying to accomplish in this offering? Typically, and I've heard this mentioned in your podcast as well, the employer-employee relationship has a paternal nature to it. And there's been several examples. We've onboarded some clients where they've had someone pass early on and it was very unexpected, come to realize that there's really nothing there for the family after the fact.

Brian McClennon:It was really motivating from a paternal perspective for the employer to put something in place, to make sure that the employees were looked after. In setting that up, we really try to understand what their motivations are and what the demographic of the employee base is. What's the most suitable investment? Is it the longer-term investment in a DC pension plan, which we'll talk about a little bit? Is it mid-term based in the group RSP, or is the demographic very young, perhaps a lower earning employees that might be best suited for a GFSA?

Brian McClennon:We've got the ability in plan design to work with the employer to ensure that there's an appropriate contribution perhaps into one or a couple of those different offerings. But the group RSP, essentially, once we set that up, it's a very simple process. We typically work backwards from the launch date, with the plan sponsor, when they want to roll this out to employees. We work backwards from there. Usually a couple of days before that launch, we have a webinar.

Brian McClennon:Generally only takes about 15 minutes, and I'll get more into that to in a little bit why it's so efficient that way, but it takes about 15 minutes. We run that a couple of days before we launch the plan. Usually a week before we launched the plan, we do the training for the plan administrator to understand how they will do contributions, be able to put members on leave, change addresses, add new members to the plan. It's really simple and straightforward. And that's an ongoing support role that our team plays for the company administrator.

Brian McClennon:And then, yeah, that led up to the initial conversations, evaluating the needs of the sponsor, and making sure that the plan design is appropriate for what they're trying to accomplish and for their employee base.

Jason Pereira:I'll tell you, from my experience, I'm of the opinion that the entire group space is a bit of a mess. There are obligations that an employer has, and oftentimes they're not paid enough attention to, and that potentially introduces liability. So talk to me about, you're setting up a group RSP, what are the obligations that the employer has towards the plan?

Brian McClennon:Right. The employer has to do a number of things, and we typically work through that through an employer schedule that we do with the sponsor of the plan. They're responsible for a number of things, basics of who's eligible for the plan, when are they eligible, what is the contribution? Is the employer going to match... Typically you see between four and 5% as an average match for 100% of the employer contribution in group RSP plans.

Brian McClennon:But they're also responsible for investment product that the members are participating in. You mentioned the word liability. There is a fiduciary liability to the plan sponsor around ensuring that the investments that the members are going to be able to participate in or invest in are appropriate and suitable.

Jason Pereira:Yeah. There's also an entire list of guidelines called the capital accumulation plan guidelines that I highly advise everyone in the space take a look at, but too often they're ignored, specifically around monitoring. The employer's supposed to have some form of like annual review of all this. And more often than not, these things get set and forget, which is not good.

Jason Pereira:The other point I want to make quickly before we move off group RSPs, you mentioned who qualifies and when they qualify for it, and to what degree. Let's just get this in everybody's head quickly. You cannot pick and choose. That's called discrimination within a plan. I've often had people say, well, like, "Yeah, I want to offer to these people because they've been with me a long time," or they've done whatever, and maybe this guy because he's really good and he's started, "But I don't want to offer it to everyone."

Jason Pereira: Well, it's like, "Well, hold on. You have to create categories and classes. And if you don't, if you basically... If two people look the same and one's not entitled to the benefit and the other is, that's discrimination. You can't do that. You have to learn that this is a build the system to reward people around certain criteria, typically job role or longevity. You can have different levels of match rates or contribution rates on your behalf, but you have to offer it.

Brian McClennon: Absolutely. Yeah. You make this available to everybody that's within the organization. Now, there might be some levers that you can pull to customize it, and that's one of the great things about the flexibility of our platform, is for us to, let's say, have tiering where if you reach five years of participation within the firm, or 10 years, there can be an automatic increase in the employer-matching percentage.

Brian McClennon:Another interesting piece around that is something called auto-escalation where the actual employee contribution will escalate at a certain milestone, typically number of years of service. Been very successful in the US in group plans. And we're just starting to see this-

Jason Pereira: Save More Tomorrow? Yeah.

Brian McClennon: Yeah.

Jason Pereira: I am an enormous fan of Save More Tomorrow, and I've been dying for people to actually do it in Canada. For those who don't know it, it was one of the Richard Thaler's... One of the reasons this guy won the Nobel prize was to basically say, if you ask people, should they save more, the answer is almost universally a yes. If you ask them, can you save more today? The answer is almost no. But would you be willing to save more tomorrow?

Jason Pereira: What it does is that it incrementally increases or takes a percentage of the annual salary increase you would normally be entitled to, and puts that into the retirement savings. So every year you slowly save a greater and greater percentage of your earnings. And because it's a small increment, you're not noticing it. But over time, just profound impacts that this thing can have. It's crazy.

Brian McClennon: Yeah. Another thing as well that really empowers that mindset is auto-enrollment. And we can talk about that [crosstalk 00:10:38]-

Jason Pereira: Yep. Yeah. I mean, that's the other thing. Auto-enrollment and default options. Now we're going into one of my favorite topics, which is behavioral finance, which is, they looked at participation rates of who's actually signing up for these plans. And of course, people get busy and lazy or don't understand it or intimidated by it and they put it aside. And then next thing you know, it's been 20 years and they haven't taken advantage of this.

Jason Pereira: Well, the better option is, oh, guess what? You got onboarded. You also got this set up for you already. End of story. That was a much greater success rate. The other one was the default. When the default is cash, some people never move it from cash. Decades worth of compounding is lost. When a default is either a target date portfolio based on their age or a balance fund or whatever it is, suddenly they're invested in the market. And if they want to change it, they can, but it involves effort.

Jason Pereira: Man, the differences just those three things have done to retirement savings in the US is just profound. And unfortunately, not fully adopted in Canada.

Brian McClennon: Yeah, I think we're getting there, and we're certainly behind trying to push these sorts of agendas forward.

Jason Pereira: But do you know why? Do you know why?

Brian McClennon: Why is that?

Jason Pereira: It's all about incentives. Do you know why they're more common in the US than here?

Brian McClennon: No, tell me.

Jason Pereira: Because there are tests in the US regarding high-income earners and senior management that say that they can only... A certain percentage of the overall plan, only a certain percentage of it can be allocated to them. So therefore, if senior managers and owners want to make the most of their retirement plan, they've got to make sure that their employees are making the most of their own retirement plan. And that doesn't exist in Canada. It's laissez-faire. It's do whatever you want.

Jason Pereira: The American managers were motivated to make sure that people took advantage of retirement plans and it has worked because they've used all these tricks to benefit their employees. In Canada, you might want to start thinking the same way.

Brian McClennon: That's a very good point. Yeah. I was aware of that, that there needs to be a threshold that is met where their percentage can't exceed as a certain amount on the entire plan. Right. So, yeah, I mean, that speaks to a number of different things, and you touched on it as well. Employers are concerned with a handful of things beyond the attract, reward, retain. Once a plan is up and running, they want to make sure, one, are my employees investing appropriately?

Brian McClennon: What's the suitability? It's great in some plans if there's a broad base balanced fund that the members can participate in, but you can't assume that a 20-year old employee is going to have similar investment objectives that someone who's very close to retirement. While it's perhaps a little bit better than an employee having to self-select the investment options, it's certainly not suitable from a perspective of making sure that the age of the employee and the investment timeline is taken into consideration.

Brian McClennon: Target date funds are somewhat better, but what we've built is, in essence, we have digital advice built into it. So part of the digital onboarding, digital KYC, is the member goes through the questionnaire. It's very much the robo aspect of the product. Part of Link, we have a subsidiary that's a discretionary portfolio manager. So we built our robo. We offer low-cost, passive ETF index tracking portfolio that offers 57 different portfolios. And depending on how you answer the questionnaire, you'll end up in one of five bands, but with appropriate weightings on 10 to 12 different investment products.

Brian McClennon: The suitability of the investments for the employees is really important. You want to make sure that, one, employees aren't self-selecting. We always prescribe the portfolio to the member. Two, that it's an appropriate investment based on the age of the employee and their goals and objectives.

Jason Pereira: Excellent. I mean, so I guess we got to one of the things I was going to hit on. But we're going to talk about best practices when setting these things up. I think so much of it has to do with the way the platform's designed in order to basically ensure success. I'll pick on the insurance companies who basically lead the way in terms of market share in Canada on this. They're a Chinese buffet, like quite honestly. It's whatever you want and it doesn't... You're good with the Mandarin, you can get... It's hilarious. You can get roast beef and Yorkshire pudding, and then pizza and then pasta.

Jason Pereira: The Chinese buffet is the every all-world buffet. There it's like, "Oh, you want single-script portfolios? We've got those. You want the target date? We've got those. You want ETFs, we've got... Or you have index funds? We've got those. And then it's like, "Here, choose." Maybe there's a couple of tools that say, Are you the kind of person that wants to direct your stuff, "Go here"? Are you the kind of person who... It's just basically analysis paralysis or just the paradox of choice. The more choice you give people, the more likely they're going to screw something up.

Jason Pereira: Sure enough, we've seen all kinds of data that supports that. Korea, nice streamlined system is to say, "The default is I took... Can you do this? Here's the portfolio you should be in. Click yes. If you want to change it, you can. But now you've got to do these other steps." I mean, like someone I know, Randy Cass, over at Nest, Nest Wealth, who's a robo-advisor in Canada, he basically talked about Zoom conversations with irregulars like, "Are you considering this?" And he's like, "Well, we're not considering that. What we can do is just like..."

Jason Pereira: But at the end of the day, how many more things do you want considered before we end up at a modern portfolio theory diversified, equal cost ETF portfolio. At the end of the day, we're going to end up with the same one of seven different portfolios. So how many different factors do you want involved?

Jason Pereira: Anyway, that's beside the point. Let's move on. We have a lot of different account types to cover, and I want to make sure we at least discuss the nuances between them all. Talk to me about defined contribution pension plans and how they differ in terms of obligation to the employer, how they're different. They look very similar to the group of retirement, but how are they different and how are they specifically different terms of the employer's obligation?

Brian McClennon: Yeah. Great. Glad we got to this one first there as the next one. It does look similar on the outside to a group RSP. One difference that's significant to the employee is that the funds are locked into retirement. So there is no opportunity for withdrawal even if it is for a home buyer's plan or anything like that. Those funds are locked in. There are a few exemptions where you can apply to the provincial superintendent to get an exemption, longevity, concerns, those sorts of things, if you're critically ill.

Brian McClennon: But typically, those are locked in. That's one big difference. The degree from the sponsor and the employer's perspective of fiduciary liabilities is significant. You mentioned earlier the annual review. That has to happen. You're running essentially a pension committee to sponsor a defined contribution pension plan. That has a lot of responsibility attached to it. There's typically costs in both hard costs and time attached to that. But it is incumbent upon the employer to run this pension committee.

Brian McClennon: Then there's, you mentioned it earlier, the CAPS, the guidelines to the, A, association, the pension supervisory authorities that publish a number of guidelines. I think there's at least nine plus a number of supporting documents that provide guidance on how these plans need to be run. How do you communicate with members? What are some of the prudent standards, fund holder agreements? What do you need to do to run these capital accumulation plans?

Brian McClennon: There's significant requirements around a fiduciary liability to the plan sponsor, that makes these plans a lot more complicated to run. Now, as a result, you start to see the participants in these types of plans are upscale. You're you're generally seeing small or medium enterprise up to enterprise-size companies that really take advantage of that. One thing that Link has done that is unique is we're both the administrator of, and the sponsor of a multi-employer DC pension plan.

Brian McClennon: In Alberta, they did some revisions to the pension act and regulations in 2015. They're really trying to set up a vehicle where small and medium-sized private businesses can participate in a singular yet multi-employer pension plan and really mitigate a lot of the overhead and fiduciary liability to participate in these plans. So really, as a participating employer in this multi-employer DC plan, you just simply join as a participating employer and the members become eligible.

Brian McClennon: We are able to take advantage of things like auto enrollment in our plans. If the member does nothing, they're automatically enrolled, unless they opt out within 30 days. They'll go into an appropriate target date fund because we know their age and off they go. The employer has to make a minimum 1% contribution of employee's salary and they're off to the races. So we're ensuring that members are, like you mentioned earlier, are participating in starting to save in these investment plans.

Brian McClennon: So you're right. The DC pension plan funds are locked in to the employee. And there is a significantly higher degree of fiduciary liability to plan sponsor. There's filings that needs to be made with the superintendent's pension. There is a number of other reports that need to be filed with the superintendent's pension and the CRA. So the bar is raised to run these plans, but purpose of these plans is for retirement. They're ensuring that members are saving appropriately so that they're going to be able to have successful retirement.

Brian McClennon: We see things like multi-employer DC pension plan as excellent vehicles to ensure that upon retirement, public pension schemes like CPP are going to be under a lot of pressure. These employer-sponsored plans really opened up an opportunity for Canadians and employees to save and be ready for retirement.

Jason Pereira: Yeah, it's interesting, I say, that locking in has such an impact because the problem is that, especially in the group world, a lot of people treat these things like bank accounts. It gets to a certain level, they cash it out, or they've got a financial need, they cash it out. Whatever it is, they look at it as a pool of capital that they can always touch if something goes wrong. And then, of course, pay no or little to no attention to the tax implications.

Jason Pereira: I've literally had people take it out to pay credit card bills, lose half the money into a limited credit card bill, as opposed to, because they didn't want to put it on the house consolidation money. Anyway, the point is that it doesn't... I'm sure if we looked at data on group RSP rates versus DC pension plans in the outcomes, I'm willing to bet anything that the DC pension plans have substantially better outcomes because of that locking in provision. When you can't touch it, you can't touch it. It just has to be there until retirement.

Jason Pereira: That also comes with basically limitations on money coming out later on too. So you can't just all take it in one shot. Far better solution. But as we said, there's a burden, there's a financial burden. There's a regulatory burden. There's all kinds of burdens there that people may not want to undertake. So you have something available in Alberta, which is a multi-employer DC plan. Tell me what that is and how it works.

Brian McClennon: Yeah. Essentially, it is a defined contribution pension plan. Really, the structure of that is Link is both the sponsor and the administrator of that plan. Any company of two employees and greater can join multi-employer pension plan. We call it the Alberta Link Pension Plan or the ALPP. All they need to do to participate in this is sign a participation agreement, and come up with an employer schedule, who's eligible when, and what's the contribution that the employer is going to make to match the employee contribution?

Brian McClennon: We provide all the plan documents and the member guides, the administrator guides, but really it's straightforward. We remove a lot of the overhead. The employer doesn't have to run pension committee. We look after the filings of the AIR and other documents that need to go to this pension. We do an annual review with the participating employer that's in it. But we look after all the heavy lifting. Typically, a smaller company, if they did want an offer, a single employer DC plan, they'd look to a consultant to help them run their pension committee.

Brian McClennon: They'd look to the consultant to help them with the selection of the investment manager. Link as the sponsor of this multi-employer plan looks after all of those responsibilities. So we're really lowering the barrier of entry for small and medium-size businesses, including private businesses participate and have their employees participating through these pension plans.

Jason Pereira: Excellent. I mean, handy, very handy. We can hopefully see that in other provinces at some point. So-

Brian McClennon: Well, it's available to employees... We just actually onboarded a client. It's an international manufacturing company with a Canadian subsidiary, employees in Ontario and British Columbia. So we had to do some plan amendments with FSRA, the pension oversight regulatory body in Ontario. Actually, Alberta and British Columbia have harmonized pension legislation. So whatever we can do in Alberta, we can typically do in British Columbia. But it is open to all those employees, so it's not just limited to Alberta companies and Alberta the place.

Jason Pereira: Moving on, we have the group tax-free savings accounts. I'm guessing those largely work just like the group RSP plans in their structure, just that you're going into a TFSA, and therefore, it's after-tax money.

Brian McClennon: Exactly correct. Right. And so that's it. These are important levers that we can pull when we're working with a plan sponsor in terms of plan design. What are the objectives? Do you want to make a 2% contribution to match an employee contribution in the long term, defined contribution retirement savings plan. Perhaps there may not be a match in the TFSA, but it's a vehicle that the employer offers alongside a longer-term investment for some short-term goal savings and objectives that an employee might have.

Brian McClennon: Through what we offer, they may see lower fees, and then the contributions are going to be coming off of payroll. So they'll be in that mode of making a regular contribution into the TFSA, alongside a longer-term investment or a midterm like the group RSP or in the DC pension. We can pull these different levers as part of the plan to make sure that the plans that are offered to the employees that the sponsor is giving are appropriate.

Jason Pereira: Yeah. Let's move on to the next one, deferred profit sharing plan. This one looks very similar, but it's almost like... I think to say it's almost an in-between the DC plan and the group RSP, because there are some handcuffs that come with this one.

Brian McClennon: That's right. Oftentimes, the DPSP, one of the things that an employer might be looking for in their retirement savings plans is if they're offering the employees vesting. In a DC pension plan in Alberta, and with our ALPP employer contributions vest immediately. In group RSP plans, employer contributions vest immediately, although in some plans, there are provisions where if the member withdraws, the employer may suspend their contributions for a period of time as a means of discouraging the ATM-like treatment of this investment vehicle.

Brian McClennon: The DPSP, it's a plan that needs to be registered with the trustee. So there is some setup cost, an annual maintenance cost for running these plans. But essentially, they allow the employer to have their contribution vest for up to two years. So that's something if an employer is concerned about the churn, where they're going to invest alongside their employee in this retirement savings plan, that they don't walk across the street in a couple months in and take that investment with them.

Brian McClennon: DPSP allows them to hold on to that contribution that they're making alongside the employee's contribution for up to two years. While they're participating in the plan, the employee doesn't have access to that piece as well. That's the key part of the DPSP, is that the employers have the ability to make sure that their contributions vest.

Jason Pereira: Moving on, we get to something that's a little less familiar for most people, now, because this was traditionally typically only offered by large scale enterprises, but now you're opening up the market just like Solium did. Employee share purchase plans. Tell me about how those work and how you facilitate theme.

Brian McClennon: The plan sponsor's looking to create a sense of ownership within their employee base. One of the ways you can do that is by spinning up an employee share purchase plan where you're offering up a piece of equity within the company. Does require that if you're a private company, you need to be doing a business valuation to really understand what the value of that piece is. But essentially you're offering up equity and ownership of the company to your employees.

Brian McClennon: Can be set up in a number of different ways where the employee can purchase equity on a regular basis, much like they would contribute into a retirement savings plan. And then the employer has the flexibility of perhaps offering some sort of matching on the equity investment in the company to the employee. So they end up owning a piece of the company and it really promotes that spirit of ownership within the organization.

Brian McClennon: We set that plan up. We administer it. We ensure that the allocation of units is appropriate, and we look after all the reporting. Then all of that can be presented to the members on the dashboard. That's something that we didn't really talk about much earlier, but the plan sponsor is really looking to illustrate their total comp. The employer is looking to illustrate total comp to the employee. So if you can display that all in one picture, there's an advantage to that.

Brian McClennon: The employee can see, oh, hey, I'm participating in a defined contribution pension plan, and the value of those assets is X. I'm participating in the TFSA and the value of those assets are Y. I've also got a stake in the company through an ESPP, and my holding is currently Z. You're able to show that on a single dashboard. Members can click on those plans and drill down for more details, for example, to see the holdings in one of the savings plan, or to see the number of units in an ESPP. So we're able to do that. For the employee, it's really convenient to be able to log on and be able to see that big picture all displayed in one place.

Jason Pereira: Next one, you have... I'm going to have someone come on and talk about this one in greater depth, but just we'll have you do a superficial review of it. But the health spending plans or health spending accounts. Tell me about those.

Brian McClennon: Yeah. An HSA or health spend account is really a prepaid health, and dental, and vision program where an employee or an employer allots a certain amount of money annually for an employee to make claims on. It's essentially administered by an administered by... Administered with the regulations on what's eligible and what's not eligible as defined by CRA. It's very clear guidelines on what's eligible and what's ineligible.

Brian McClennon: But let's say you want to either provide more traditional health and dental plan from an insurance company, an alternative, and one that seems to work quite well, and in smaller companies as they're starting up is the HSA. So instead of buying plan that hopefully covers the needs for most of your employees, you really just pass on that responsibility for selecting the right plan to the employee by saying, "Hey, you've got $3,000 or $5,000 to spend in an HSA annually as you make claims for dental, vision, and health requirements. You just simply submit those and we'll reimburse you for those claims."

Brian McClennon: Then you can get up to that threshold, and then you've maximized the health benefit that the plan sponsor or the employer offers. Sometimes the unused portion can roll over into the next year, but that's all defined in the plan text of running that plan. You can have that. Use it or lose it, or you can have a rollover. Those HSA accounts can be fairly large. You can get those 12, $15,000. That's something that makes sense to-

Jason Pereira: That's a lot of dental work if you need it.

Brian McClennon: Yep. As kids that have braces, I understand that world.

Jason Pereira: And so, everybody goes first. Excellent. I mean, if I had to sum it up, quite honestly, is that this has been traditionally a largely paperwork-intensive, heavy lifting structure or issue in the past. It's also been, for lack of better term in most cases, a lot of small accounts. The average account, especially with starting out, starts off at zero, which most advisors cringe because there's no money to be made on that for a very long time.

Jason Pereira: That's not to say we should only be focusing on money, of course. So it's just basically the realities of the economics of it, is the value of setting it up and going through all this stuff is minimal initially. What you've done is you've created a highly digitized, integrated process for implementation of all these, with as little heavy lifting as possible, and with a number of behavioral tweaks built in that hopefully will improve outcome, is what it sums it up to.

Brian McClennon: Absolutely. Through the platform, we've driven efficiencies to scale this and roll this out and administer it on an ongoing basis very effectively. Through that whole exercise, the user experience for the members and the administrators is significantly improved. You're not chasing paperwork around. We look at those sorts of things as table-stakes, like a digital onboarding, digital KYC, robust administration and record keeping. Really, it's a platform with a rules engine attached to it that says, "What type of plan is it? Is it a savings plan or an equity plan? Okay, it's a savings plan. What kind? It's a TFSA. Okay, we'll treat it this way and then have the reporting engine generate all the appropriate reports, empowering the individuals to update their information, their contribution amounts on the portal, to be able to do that very easily and effectively. We make that very simple and straightforward for participants in these plans.

Jason Pereira: Well, Brian, thank you very much for taking the time. Where can people find you?

Brian McClennon: You can go to our website. It's L-I-M, as in Link Investment Management, solutions. There is no .com on the end of that. Or you can email me, and it's not first name at URL like most FinTechs [inaudible 00:31:19], although I think that alias doesn't just-

Jason Pereira:Okay. There you go. I was going to say, so you basically wanted to avoid the spanning people like myself. Okay. Got it.

Brian McClennon:Yeah. You can send it to brian@lim.solutions and that'll find me.

Jason Pereira:Excellent.

Brian McClennon:Or bmcclennon.

Jason Pereira:All right. Thank you very much and take care.

Brian McClennon:All right. Thanks very much.

Jason Pereira:That was Financial Planning for Canadian Business Owners for this week, and I hope you enjoyed that. I highly encourage you, if you are in the group space, to take a look at their solution because it is far more streamlined, simplified, and easier to work with than many of the alternatives out there. As always, if you enjoy this podcast, please review on iTunes, Stitcher, or wherever you get your podcasts. Until next time, take care.

Producer:This podcast was brought to you by Woodgate Financial, an award-winning financial planning firm, catering to high net worth individuals, business owners, and their families. To learn more, go to woodgate.com. You could subscribe to this podcast on Apple podcasts, Stitcher, Google Play, and Spotify, or find more episodes at jasonpereira.ca. You can even ask Siri, Alexa, or Google Home to subscribe for you.