Finding Canadians the Retirement Support They’re Missing

Everyone has heard horror stories about people who retired at 65, only to re-enter the workforce once they realized that their post-career savings weren’t as sufficient as they’d initially thought. And while it can be tempting to simply write off these cautionary tales as indications of poor personal finance skills, Jonathan Weisstub, co-CEO of the retirement planning platform Common Wealth, thinks the real story is more complex. “A lot of people approach this problem as one that an individual could somehow fix on their own — if only they had a different psychology and more discipline with money,” he says. “But there’s no evidence of that being an easy — or even a possible — thing to change.”

With that in mind, Weisstub believes that successfully preparing Canadians for life after the workplace needs to start in the workplace. “In many ways, we see the best predictor of someone being able to save for retirement as being whether or not they’re in a plan that is matched by their employer,” he says. “That creates the right behavioural incentives to save. And on the business side, a benefit like this helps with employee attraction and retention.” Knowing that, he sees a critical coverage gap in the Canadian market when it comes to the retirement benefits that small- and medium-sized companies provide to their employees. “By some accounts, we are 50 per cent less penetrated in that space than the United States,” he says.

Weisstub is working to change that. Since he and his business partner Alex Mazer co-founded Common Wealth back in 2015, the financial technology company has become one of Canada’s fastest-growing providers of first-time retirement benefits. Key to Common Wealth’s approach is developing a compelling retirement benefit plan that holds members, providers and advisors in equal regard. 

On the member side, this means addressing the difference between a simple investment account like a Registered Retirement Savings Plan and a true post-employment financial strategy. As Weisstub explains, this starts off by reverse-engineering a plan to take full advantage of government programs developed to support Canadians during the later period of their life, including the Canadian Pension Plan and the Old Age Security tax credit, as well as the Guaranteed Income Supplement payment for those who qualify. “We think about this by asking, How do you optimize for benefits and minimize for tax?” he says. Without this guidance, many Canadians might lack the deep financial literacy to use these programs to their full potential.

The second component of Common Wealth’s offering is related to strategic asset allocation and determining what type of investment is right at what life stage. “By default, we try to get people into a target-date fund where the proxy for risk is connected to the age at which someone wants to retire,” says Weisstub. As members age, their asset manager automatically reallocates assets between equity and fixed-income products in a way that’s appropriate for their current age — skewing more towards fixed-income investments for someone close to retirement age who has less time to recover from big drops in the market, for instance. Along with asset-allocated investments, plan members also have the option to integrate insurance products like annuities that can add an extra layer to their post-retirement income.

Ultimately, Common Wealth’s plans shift the burden of financial planning from individuals to experts better equipped to make complex investment decisions. “The evidence around products like these is that they typically return 200 basis points more a year, on average, than what people see outside this selection of products,” Weisstub says. “You’re just better off having institutional asset managers do your allocation for you. Even for people who are passionate about investment, the evidence is that doing it yourself is highly destructive in the creation of long-term value.”

Common Wealth pays just as much attention to the needs of the employers who are providing these plans. “We appreciate that small- and medium-sized business owners don’t want to spend a lot of time onboarding or administering benefits, so it’s critical that the process be an easy and delightful one,” Weisstub says. He finds that technology helps to streamline key parts of the process and alleviate typical pain points. “By adopting cloud-native infrastructure, we are able to integrate various components into a user experience that offers real ease,” he explains. “Compared to the legacy providers in this space, people are grateful to have something that allows them to support their employees in a way that those employees really understand and appreciate.”

Sure enough, the outcome is a solution that gives Canadians a clearer picture — and much greater support — when it comes to their retirement, all in a benefits plan that feels as turnkey as possible for business owners. With these components in place, it’s now up to Common Wealth’s advisors to spread the word. “In our view of the market, the best way to close the coverage gap is for our stakeholders to encourage employers to add a retirement benefit — and to match employee contributions,” Weisstub says. “It’s that extra incentive that really changes savings behaviour.”

He points out that in some parts of the world — in certain states, as well as in the U.K. — governments have actually stepped in to require businesses to offer similar plans. Whether Canada follows suit or not, he believes that there’s a strong economic case for the private sector to lead the charge. “When our advisor partners encourage businesses to make contributions to retirement plans, it’s based on the best interests of those businesses,” he says. “The more financially secure a workforce is, the healthier it is psychologically, and the more likely it is to do better work. And that has a return on investment.”