Recession Talk Grows
Recession coming up in dialogue and print is at its highest rate since 2011/2012 when Europe was in recession. And while it is being mentioned more and more in context of the U.S., the data does not support an imminent U.S. recession, says Beata Caranci, senior vice-president and chief economist at TD Bank Group. During the ‘Tarrified: Global Macroeconomics in the Age of Protectionism’ session at the TD Asset Management Institutional Investment Symposium, she said the manufacturing side is suffering, but it is also suffering in Europe and China. However, consumers are moving at light speed and how do you get a recession out of that, she said. All the risk is on business side, but not on households and in the U.S. consumers account for 70 per cent of GDP. So unless they start to scale back because of recession fears, all that may happen is that some sectors contract as happened in 2016/2016 which was a period of slow growth, but not a recession in the U.S. Concerns about China are also unfounded because its growth will be slowing for the next decade due to its terrible demographics. They are trying to keep things in balance and depend on consumers for more growth, but that is part of their plan, she said. The most likely outcome from the U.S./China trade war is something similar to the Japan/U.S. deal. The U.S. will likely avoid a full comprehensive trade deal that has to be ratified in Congress. Instead, it will be something like an executive order, she said.
ETF Allocations On Course To Increase Significantly
Allocations to exchange-traded funds (ETFs) are on course to increase significantly over the next two to three years, says JP Morgan Asset Management (JPMAM). ETFs made up just over a fifth of client portfolios worldwide as recently as 2016. This figure is set to increase to 39 per cent by 2022. Over 80 per cent of global fund selectors surveyed said fees and costs were a main driver for ETF allocations, while 65 per cent elected them for trading flexibility. Investors want simplicity, transparency, and diversification which isn’t always possible when investing in global bond markets directly. Latin America was also found to be way ahead of Europe and Asia Pacific in terms of ETF usage. ETFs currently make up 35 per cent of portfolio allocations in Latin America, compared to 25 per cent in Europe, Middle East, and Africa, and 23 per cent in Asia Pacific.
Unicorn Prospects Troubling
Only a dislocative event is missing from the bubble checklist when it comes to ‘unicorns,’ privately held tech startup companies valued at over $1 billion, says William Priest, chief executive officer, co-chief investment officer, and portfolio manager at Epoch Investment Partners. He told the ‘Unicorns and IPOs: Where Private Meets Public’ session at the ‘TD Asset Management Institutional Investment Symposium’ that there is plenty of liquidity and stretched valuations, the other requirements for an eCommerce bubble. And while he doesn’t liken the current situation to the dot.com bubble at the turn of the century, the prospects for IPOs for these companies is troubling. In the U.S., IPOs (initial public offerings) are on a pace to surpass 1999. However, the proportion of IPOs with negative EPS (earnings per share) is double the historic average and 81 per cent of recent IPOs are for unprofitable firms. In some cases, the pathway to profitability is anything but clear, he said. With venture capital investors backing 80 per cent of the tech IPOs, their multiple fundraising activity often produce “stratospheric valuations” which are difficult to reconcile with FCF (free cash flow) fundamentals. As well, while the net supply of equity in the tech sector increased 69 per cent between 1996 and 2001, it contracted by nine per cent between 2014 and 2019, so the equity supply for the U.S. tech sector is on a declining trend. On a positive note, during the late 1990s, many firms came to market prematurely. The median age was four years, but IPOs in the tech sector now are 12 years old on average.
ESG Influences Active Decisions
Environmental, social, and governance (ESG) factors are increasingly influencing the investment decisions of active managers, says a report by Russell Investments. More than half of active managers allow ESG criteria to drive investment decisions compared to 30 per cent who were surveyed last year. Also, over a third said they were initially motivated to integrate ESG considerations into their investment process based on the opportunity for superior risk-adjusted returns. The survey also found that governance was the most important ESG component, with over 80 per cent of respondents saying they thought engagement with portfolio companies was crucial.
Due Diligence Ensures Best Returns
Good due diligence processes ensure the best returns for clients when it comes to infrastructure, says Louis Bélanger, vice-president and director, private debt, at TD Asset Management. He and Matt Press, vice-president, infrastructure investments, at TD Greystone Asset Management, discussed ‘Infrastructure: Anatomy of a Deal’ at the ‘TD Asset Management Institutional Investment Symposium.’ Press said infrastructure is getting a lot of interest in this low interest rate environment because of its stable cash flow and income generation. It also offers a significant market opportunity, whether equity or debt, with $80 trillion needed for these projects over next 20 years. While a relatively new asset, typically, it is things like physical assets ‒ airports, toll roads, wind projects. It offers opportunities to enhance returns, reduce risk, and add diversification given its low correlation to public assets. The challenge, said Bélanger, is to make sure investors are paid for the risks they take. This requires due diligence to assess the risks, their impact, and the possibilities of mitigating these risks, said Press. Bélanger added that with private debt, a pre-assessment is also necessary as they don’t rely on public ratings agency, they do their own. Analysis is done around key pillars ‒ credit themes, ESG (environment, social, and governance), covenant quality assessment, and business and financial risk assessment. Ultimately, he said it takes a lot of time and work to assess the trade-offs, with Press saying a disciplined active approach to private asset classes can yield better results.
CFA Seeks Diversity Ideas
Dozens of firms with combined assets under management of more than US$17 trillion are responding to the challenge to make the investment industry more inclusive by implementing ideas in the CFA Institute guide ‘Driving Change: Diversity & Inclusion in Investment Management,’ says bcIMC. The guide, which inspired the ‘CFA Institute Diversity & Inclusion Experimental Partners Program,’ includes 20 ideas generated in concert with the industry through a series of roundtables with more than 300 participants. In this program, each firm was asked to focus on up to three of the ideas from the list and have developed action plans to be implemented over 18 to 24 months. Some began as early as January 2019 and the program will conclude in December 2020. Along the way, the participants provide confidential quarterly updates to the CFA Institute about what has worked and what has not and they can work with other participating firms to learn from each other. At the end of the program, the CFA Institute will update the original report findings, describe success stories, and outline challenges from which other investment industry firms can learn. The most commonly selected ideas relate to finding ways to better understand and manage biases including in hiring and advancement. Other priorities focus on improved communication, including the use of personal stories to build connections.
DC Sponsors Need To Look At Big Issues
Defined contribution pension plan sponsors need to focus on the big issues first, say Jafer Naqvi, vice-president and director, fixed income and multi-asset, and Nicole Lomax, associate fixed income and multi-asset, at TD Asset Management. In ‘DC Decisions ‒ What Matters Most for your Plan Members’ at the ‘TD Asset Management Institutional Investment Symposium,’ they said sponsors need to quantify the decisions based on their impact on the value of the accounts and the capital longevity. Plan design, contribution rates, and investment structure all have varying impacts on results. For example, members contributing an extra one per cent can double their account value and extend the period of time their benefits will cover. It is one of the first decisions sponsors make, but it has a big impact, said Lomax. When it comes to investment strategy, they need to get the multi-asset default option right. Naqvi said customization is another decision, but Lomax said it isn’t that important in most cases because they is little difference in the results of generic or custom approaches. One area that does have an impact is adding alternatives to the asset mix. Navqi said the rise of alternatives in large pension plans has seen them become the biggest asset class, ahead of equities and fixed income. While difficult to add to a DC plan, they add the most value in terms of account values and longevity capital.
OMERS Leads TouchBistro Funding
OMERS Growth Equity has led a C$158 million Series E funding for TouchBistro, a global restaurant technology solution provider, with an $85 million investment. The funding includes participation from Barclays Bank, RBC Ventures, and BMO Capital Partners. Existing investors, including OMERS Ventures, Kensington Capital Partners, BDC IT Venture Fund, Napier Park Financial Partners, Recruit Holdings, and JPMorgan Chase, also participated. In 2018, OMERS Ventures made an initial investment in TouchBistro. Founded in 2010, TouchBistro pioneered the transformation of the restaurant industry through its award-winning iPad point of sale (POS) system.
Walch-Watson Earns Award
Patrice Walch-Watson, senior managing director, general counsel, and corporate secretary of the Canada Pension Plan Investment Board (CPPIB), has been named a recipient of the ‘Chambers Canada GC Influencer Award’ by global law-ranking firm Chambers & Partners. The award celebrates excellence within the legal profession and recognizes influential in-house counsel leaders around the world. This year was the inaugural launch of the Canada list, which highlights general counsel lawyers in Canada for their pioneering in-house work, effective team leadership, diversity, and CSR champions.
Pension Trends Examined
Darren Ulmer, an elite partner advisor at Sun Life Financial, a global professional speaker, and author, will share his extensive experience and insights into ‘Pension Trends’ at a CPBI Saskatchewan session. He will discuss pension trends, markets, and what employers are doing with their pension plans. It takes place October 16 in Saskatoon, SK, and October 17 in Regina SK. Information on the Saskatoon session is at Saskatoon Pension Trends and Regina Pension Trends in Regina.
Standard Builds On Solvency Momentum
British Columbia’s introduction of an 85 per cent solvency standard and a ‘going concern plus’ standard for defined benefit pension plans is a critical change which further builds on national momentum in this direction and will improve sustainability of defined benefit plans going forward, while maintaining a strong level of benefit security, says the Pension Investment Association of Canada (PIAC) in its comments on the BC government report on the ‘Solvency Funding Framework.’ However, it believes that the PfAD (Provisions for Adverse Deviations) determination should have a tighter link to plan asset allocation as is done in Ontario and Quebec. While it appreciates the committee’s desire to have the PfAD adjust with interest rates as a stabilizing mechanism, it does not believe that the regulatory funding requirements should be neutral to asset allocation. A standardized PfAD based mainly on long-term bond yields at the valuation date may prove be too conservative for substantially de-risked plans in some scenarios (e.g. in higher interest rate environments) and conversely less conservative for plans with a higher allocation to ‘risky assets’ in other scenarios (e.g. very low interest rate environments). While the proposed PfAD determination may work well for the average plan in a normal rate environment, a tighter link to asset allocation will make the regime more robust to plans with a broader range of asset allocations and may make it more robust to extremely low interest rate scenarios, which have developed in a number of advanced economies in recent years. This approach would moreover be consistent with the general approach to regulatory capital in the broader financial sector which typically discriminates based on overall balance sheet risk.
Active Managers Recognize Importance Of Benchmark Data
Active managers recognize the importance of benchmark data to their business, but asset management executives think they can and should be deriving even more value from index providers’ vast databases and analytic expertise, says a study from Greenwich Associates. It says that benchmark index data plays an essential role in the investment process, helping asset managers to understand market trends, develop forecasts, and compare performance across different funds, asset classes, geographic regions, styles, and other dimensions. Indexes also enable investors to understand their return attribution and communicate performance. And they are used increasingly in other functions such as enterprise risk management, alpha generation, and marketing. As such, more than 80 per cent of the active managers participating in the study rate index benchmark data as important part to their businesses.
Unco-ordinated Effort Coming On Climate Change
Investors should be braced for governments to act forcefully, but in an unco-ordinated fashion on climate change within the next five years, says the Principles for Responsible Investment (PRI). It has released major research papers related to modelling the financial impact of what it has called the ‘Investable Policy Response’ (IPR). A collaboration between the PRI, Vivid Economics, and Energy Transition Advisors, with contributions from 2°Investing Initiative, Carbon Tracker, and the Grantham Research Institute on Climate Change and the Environment, one of the main parts of the IPR work is a ‘Forecast Policy Scenario,’ which is primarily aimed at demonstrating latent risk in investor portfolios. It is said to differ from climate scenarios in that it does not work back from a pre-defined target temperature, but works up from probable policy and technology developments. According to this scenario, there will be an acceleration of policy announcements related to climate change in 2023 to 2025. Other developments it forecasts include a ban on internal combustion engine cars in ‘first mover countries’ by 2035 and carbon pricing of $40 to 60 per tonne of carbon dioxide by 2030, also for first movers.
Hedge Funds Rely On Third-party Tools
Hedge funds across the spectrum are becoming increasingly reliant on third-party tools to stand out and defeat their competition, says a study from law firm Lowenstein Sandler. Its report found 82 per cent of hedge funds are using alternative data to reach performance targets. Fund managers that are using alternative data are using it to better capture trends in the market – a practice that some call “alpha through information.” As well, managers said alternative data helps to confirm existing assumptions and reinforce fundamental research. Overall fund size also impacted how managers use data. Smaller funds – those with $500 million or less in assets under management – rely on alternative data to understand competitive markets. For funds between $500 and $5 billion in AUM (assets under management), alternative data is used to provide additional insights into sectors, industries, or issues. For funds $5 billion or above, alternative data plays a role in developing unique investment strategies.
Scale Of Assets Creates Barrier
The scale of assets required to launch a new target date fund priced low enough to compete with the largest managers is an increasingly powerful barrier to new entrants, says Cerulli Associates. It finds that in the face of fee compression, target date managers and retirement plan consultants are exploring new avenues for customization such as blending active and passive strategies, creating white-labeled, open-architecture products, and incorporating a transition to managed accounts. In 2018, total active target date fund assets remained higher than passive, but their market share lead over passive target date funds fell to 12 per cent from 18.1 per cent in 2017. New product development, such as hybrid target date funds which use a combination of active and passive management, are changing this dynamic. “Assets invested in hybrid target date funds are growing and nearly half of target date managers surveyed believe that hybrid target date products will gather meaningful defined contribution plan assets during the next one to three years,” says Daniel Uquillas, a senior analyst at Cerulli. Contrary to the intuitive expectation that most interest in hybrid products would come from fully active sponsors looking to pay lower fees, equal interest has come from fully passive sponsors, which may view the active component as a means of providing downside protection in the event of a market downturn.
Morneau Shepell Adds U.S. Firm
Session Dives Deeper On Retirement Plans
The CPBI Southern Alberta Region’s ‘Retirement Plans 201 ‒ a Deeper dive into Group Retirement Plans’ will look at the risks, decisions, and challenges faced by retirement plan sponsors in Canada. Attendees will learn the essential elements that defined benefit pension plan sponsors should know, considerations for cross-border plans, effective tricks and tips for effective decision-making, and insights about the future of retirement plans. It takes place October 24 in Calgary, AB. For information, visit Retirement Plans 201
Blue Cross Alliance Formed
Blue Cross Life Insurance Company of Canada and Pacific Blue Cross will form an alliance, effective January 2, 2020, to bring together local service and insight, with national expertise and scale, to provide products and services to British Columbians. This nationally aligned Blue Cross alliance brings several new benefits that will help Pacific Blue Cross grow with advisors, plan sponsors, and members. Enhancing its capabilities in underwriting, pricing, reserving, actuarial, and medical underwriting allows Pacific Blue Cross to invest in more work and wellness solutions to improve health and wellbeing for British Columbians. Pacific Blue Cross will remain the primary contact for all sales, service, and claims.
ESG Improves Performance
Implementing environmental, social, and governance (ESG) criteria can improve the performance of both active and passive risk-factor portfolios, says research by Lyxor Asset Management. However, it also found a policy of exclusion based on companies’ ESG scores did not impact portfolio performance negatively. In most cases, using an ESG filter improved the performance, even on a risk-adjusted basis. Excluding 50 per cent of companies with the lowest ESG ratings from a European equity size portfolio added 2.3 per cent per year of return over 10 years, while removing 1.6 per cent of volatility.
Real Estate Outlook Challenging
The outlook for real estate over the coming year is more challenging, says ‘The Preqin Investor Update: Alternative Assets H2 2019.’ It finds investors are largely satisfied with the asset class’s performance over the past 12 months, with 83 per cent saying that returns have met or exceeded their expectations. But future prospects are less certain and 23 per cent of investors believe that returns in the coming 12 months will decline – the highest proportion of any asset class. This is likely due to high asset valuations putting pressure on pricing as 29 per cent of investors say that assets are overvalued and expect a pricing correction in 2020. Four out of five investors ranked asset valuations as the biggest challenge to future returns, followed by high competition for assets. In response to this, more than a quarter of investors expect to place less capital in the asset class than they did in the previous 12 months.
NEST Wants To Invest
One of the UK’s leading defined contribution pension providers is to set up its own regulated investment subsidiary in anticipation of rapid asset growth in the next few years. NEST has applied for permission from UK regulator the Financial Conduct Authority (FCA) to become regulated as an occupational pension scheme. Under the UK’s investment rulebook, this would allow the £8 billion scheme to set up a wholly owned subsidiary – dubbed ‘NEST Invest’ – to run its investments. If granted, it would allow NEST greater flexibility in its investment strategy, including the ability to make co-investments in private markets. As well as co-investments, FCA authorization would allow NEST to direct fund managers to use derivatives to efficiently manage cashflows and risk.
ETF Assets Decrease
ETFs and ETPs listed globally gathered net inflows of US$3.43 billion in August, bringing year-to-date net inflows to US$273.04 billion, says ETFGI. Assets invested in the global ETF/ETP industry have decreased by 1.6 per cent, from US$5.74 trillion at the end of July to US$5.65 trillion at the end of August.
ACPM Honours Volunteers
Pierre Lavigne, Stephanie Kalinowski, Julien Ranger, and Derek Dobson have earned awards from the Association of Canadian Pension Management (ACPM). Lavigne was named the winner of the Don Ireland Award for Exceptional Volunteerism. The award recognizes the exceptional effort and achievements of an individual over a significant period of time on behalf of ACPM. Lavigne is the longest standing ACPM volunteer, starting as a member of the Quebec council in 1998 and is still on the council after 21 years. He has served on three national committees ‒ strategic initiatives, national policy, and national conference planning. He has also served as a board director and chair of the audit and finance committee. Dobson, CEO of the CAAT Pension Plan, was awarded the ACPM Industry Award. He manages and promotes a fixed cost plan design (DBplus) which won the 2018 World Pension Summit Innovation Award for Plan Design and Reform. He has been a member of the ACPM board of directors since 2016, serving on the human resources committee, the national policy committee, and the strategic initiative committee. Kalinowski and Ranger shared the ACPM Council Award which recognizes the efforts an individual who has significantly contributed to the work, growth, and development of their council. Kalinowski has served at the chair of the Ontario council since 2017. The chair of the pension, benefits, and executive compensation group at Hicks Morley is ACPM liaison to the Financial Services Regulatory Agency of Ontario and the government of Ontario. A member of the national policy committee, she has been involved with various council activities including event planning, papers development, and membership initiatives. Ranger was honoured for his work with the Quebec region. A partner, pensions and benefits, at Osler LLP, he is currently an ACPM board director and a former member of the national policy committee. An active member of the Quebec council, he served as chair from 2016 to 2018 and is a significant contributor to consultations and responses for Retraite Québec. He has also been instrumental in helping to organize regional events.
Complexity Can Be Navigated
Navigating complexity with an outsourced chief investment officer, public market investment solutions to the private market conundrum, pension consolidations and mergers as de-risking solutions, and the rise of ESG will be addressed the Benefits and Pensions Monitor ‘Pension Risk Strategies’ Meetings & Events session. Featured speakers are Eric Menzer, of Manulife Investment Management; Dino Bourdos, of Guardian Capital; Jeff Kissack of the CAAT Pension Plan; and Cynthia Shaw-Pereira, of BNY Mellon Global Risk Solutions Canada. It takes place September 26 in Toronto, ON. For information, visit Risk Strategies
Employees Want Financial Education In Workplace
A large majority of employees (80 per cent) want some type of financial education at work, says Eckler’s national survey on financial wellness in the workplace. It says more than half (54 per cent) of employees feel some degree of stress about their finances and close to one-third (32 per cent) would describe it as a high degree of stress. “The amount of stress Canadians face today is unprecedented. Lack of focus at work, increasing amounts of time spent managing personal finances, and increased use of employee benefit plans to manage stress-related illnesses is now commonplace,” says Janice Holman, a principal at Eckler Ltd. “As employers continue to look to financial wellness programs as the prescription for mitigating both the personal and workplace impacts of financial stress, designing a program that fits the symptoms and is offered with the right treatment plan is critical to improving outcomes.” Survey respondents had strong opinions about who should deliver the financial education. A large majority (84 per cent of employers and 90 per cent of employees) want their third-party educator to be unbiased, and 85 per cent of companies and 84 per cent of employees want their education programs to be provided by a third party that is experienced. An equally large majority (more than 80 per cent of employers and 74 per cent of employees) say third-party accreditation is important. While a good number of employers are offering financial education programs, progress can be made by making connections between organizational objectives and the impact of employee financial stress.
Shifts Driving Down Fees
A worldwide shift of portfolio assets to passive management strategies and a new, intense focus on fund pricing by institutions globally are driving down fees for asset managers, says Greenwich Associates’ ‘Pricing in Asset Management: From Art to Science.’ This, in turn, is putting pressure on asset management revenue growth and profit margins. However, asset managers can use sophisticated benchmarking to minimize the impact of eroding fees and even turn pricing into a competitive advantage. It all starts with good data. Without reliable benchmark data on fees, managers are operating in the dark and in this era of tough negotiations, even average industry benchmarks are of limited use, it says. To compete effectively, managers need insights that allow them to provide customized pricing and fee structures based on the size of mandate, asset class, strategy, geography, and a host of other factors.
Yield Curve Predicts More Than Recession
The yield curve has predictive power that goes beyond the chances of a recession, says research from AQR. The yield curve charts the difference between the rate of a bond with a long life compared to one that matures in a short period of time. It generally slopes up as investors are paid higher rates to hold bonds that mature far into the future and lower rates for short duration paper. An inverted curve occurs when short-term rates are higher than long-term ones. The factor investing firm argues that there is plenty of research to support the yield curve’s predictive value when it comes to macroeconomic factors such as inflation and interest rates. Nonetheless, ‘Inversion Anxiety: Yield Curves, Economic Growth, and Asset Prices’ says it has come to be defined as a signal for a coming recession as the media loves a good sound bite and the curve inverting is a good one.
Mental Health Impact Examined
The Rotman School of Management is bringing together hundreds of senior business leaders, mental health advocates, medical professionals, students, academics, and industry representatives to raise awareness and discuss the impact of mental health on the Canadian economy. The conference will highlight the resources and supports currently available, focus on solutions that are working at home and abroad, identify challenges and opportunities for improvements, and find new ways to design innovative policies and workplace best practices in order to manage the growing burden of mental health. It takes place November 26 in Toronto, ON. For information, visit Mental Health Impact
Contingent Plans Need Regulatory Focus On Sustainability
A lack of regulatory focus on sustainability is making it an issue for pension plans with contingent benefits, says Barbara Sanders, associate professor in the department of statistics and actuarial science at Simon Fraser University. She and Barry Gros, non-voting chair of the University of British Columbia Staff Pension Plans board, outlined their research findings on sustainability of these plans ‒ which include multi-employer pension plans, shared risk plans, and target benefits plans ‒ in ‘The Quest for Sustainability in Pension Plans with Contingent Benefits’ at the ‘2019 ACPM National Conference.’ She said concerns about plan sustainability are a recent development. It was not until 2008 that it became a hot topic when plans turned their attention to risk. However, most plans use the term the sustainability without defining it although there are similarities in their interpretation including affordability, benefit security, and looking at the long term. It is also more than financial components. It also includes governance, plan design, and communication as key contributors to sustainability. Gros said design and the nature of a plan play a role in sustainability, working together with financial management. This means plans need to be simple, focus on certain future benefits, incorporate things important to members, keep contributions within the ability and willingness of participants to pay; and with resilience built in by maximizing the plan’s ability to manage adverse circumstances. However, a key issue is a lack of regulatory focus on sustainability. For Sanders, what must be avoided is trying to lay long-term goals of plans on short term regulation. Policy-makers need to make a choice on where the focus should be. She suggests a principles based approach which gives plans the ability to align financial management with their long-term sustainability goals. Gros noted this is important because the goals of these are different than those of traditional defined benefit plans. However, more research is needed in this area to determine what works and the existing practices of successful plans.
We Can Create New Mental Health Paradigm
Mental health illnesses remain a burden on the economy and to employers, but we can create a new paradigm, says Dr. Richard Heinzl, global medical director at WorldCare International, Inc. Speaking at the Benefits and Pensions Monitor Meetings & Events session, ‘Benefit Trends & Insights,’ he said the cost to the Canadian economy is estimated at $51 billion, with $20 billion from workplace losses. “Half of the sick days taken in the workplace are due to mental illnesses.” As well, mental health illness claims are among the fastest growing disability claim type. In his presentation, ‘Workplace Health and Wellness; A Working Model for Mental Health,’ Heinzl said that while awareness around mental health may be increasing and stigma decreasing, “we haven’t invented too many new things to address this problem. Innovation is badly needed.” Areas that need to be addressed include getting a proper diagnosis and access to treatment, including access to psychiatrists, which currently have a waiting list as long as 24 months in some regions of the country. WorldCare, in partnership with Co-operators, started a pilot study that looks at the most difficult and expensive cases to determine what was lacking. They wanted to empower all stakeholders involved and leverage technology. The focus was to get the claimants back to work with deep engagement and psychiatric guidance. WorldCare has access to 600 specialist psychiatrists and psychologists via Massachusetts General Hospital. Tele-psychiatry was considered a valid approach to make the program accessible across Canada. The study had a profound impact. “We wanted to help a couple of people, but 50 per cent went back to work.” Seventy per cent of participants went back to full-time capabilities, 90 per cent had new treatment recommendations, and 100 per cent had a positive satisfaction rate. Overall, the study showed a strong return on investment with reduced rate of claimants on disability, enhanced productivity, and reduced presenteeism. “We are able to make a difference,” said Heinzl. He said the industry needs a cultural shift and creative approaches.
Medical Benefit Costs Outpace Inflation
Employer-provided medical benefit costs in Canada could rise six per cent in 2020, outpacing general inflation by 1.9 per cent, says Aon’s ‘2020 Global Medical Trend Rates Report.’ The increase for Canada employer-sponsored medical plans expected next year is due to a combination of higher costs from the increased spend for drugs in general, reflecting the many health risk factors facing Canadians today. Several of these risk factors are manageable through a combination of drug therapies and other wellness initiatives and employers are increasingly looking at the bigger picture to determine the approach they want to take to mitigate costs. Globally, costs for employer-sponsored medical plans in 2020 are forecasted to increase eight per cent, up from 7.8 per cent growth this year. This is mainly due to expanded benefits and a slight increase anticipated in general inflation. Projected medical trend rates vary significantly by region. Costs are expected to increase the most in Latin America and Middle East/Africa regions, with average medical premium rates forecasted at 13.1 per cent and 12.2 per cent, respectively. In contrast, Europe is projected to see an average medical premium rate increase of 5.7 per cent.
Plans Of Past No Longer Work
A lot of rethinking of pension plan design is going on because the plan designs of the past aren’t working for those being hired today and are even becoming a barrier to recruitment and talent retention, says Kim Duxbury, executive client partner, group retirement services, at Sun Life Financial. She told the ‘Adapting Retirement Programs To A Diverse Workforce’ session at the ‘2019 ACPM National Conference’ that if a plan is easy to understand, there is a greater chance it will be appreciated and valued by employees. This means effective plans today are moving away from complexity and giving employees more choice on where they can direct their retirement plan contributions. While company contributions and matches are going into the employer pension plans, employees are being allowed to put their contributions into other vehicles like RRSPs and TFSAs. She also said sponsors are stepping back from financial education because it “doesn’t move the needle” and only leads to disappointment.
Machine Learning Is Future In Claims Management
While artificial intelligence (AI) is being used in the group insurance space for member experience and operations, very little is done using AI in claims management with almost all of this work currently being driven by individual plan sponsors, says Scott Campbell, a clinical pharmacist at Cubic Health Inc. In his presentation, ‘Use of Machine Learning & Predictive Analytics in Health Benefits,’ at the Benefits and Pensions Monitor Meetings & Events session, ‘Benefit Trends & Insights,’ he said, companies that don’t integrate machine learning (ML) and broader AI in claims management over the next five years will be left behind. “ML has potential profound implications for our industry from a disability or health management perspective,” he said. Currently, most carriers, plan advisors, and health service providers are stuck in the realm of reporting. And, companies can’t leverage ML and broader AI on a reporting platform. ML needs to sit on an analytics platform. Reporting is the process of organizing data into information summaries in order to monitor how different areas are performing. Analytics is the process of exploring data and reports to extract meaningful insights which can be used to understand and improve performance and facilitate effective decision-making. Analytics answers ‘why’ and ‘so what’ questions through exploring and interpreting data as opposed to just compiling data. With analytics, plan sponsors can, for example, quantify the prevalence and severity of every chronic and acute disease state within a specific plan population. They could then create a predictive analysis based on those results. ML could also take enriched data and enhance assessment of leading indicators for disability and help identify high-risk claimants proactively. Since reporting platforms are not the same as analytics platforms, stakeholders will need to make meaningful investments in tech, infrastructure, and people or look at partnerships.
Canada Exposed To World Trade
Were Canada an island, isolated from the broader global economy, there would be little reason for concern, says the ‘AB Global Economic Outlook September 2019.’ Both growth and inflation are at or near equilibrium and the Bank of Canada would be comfortably on hold. But Canada is not an island, leaving it exposed to the vicissitudes of global trade. With the global backdrop worsening, Canada is unlikely to be spared from the economic downdraft which is expected to intensify in coming quarters. The Bank of Canada can see the storm coming and it seems prepared to cut rates, but not until the bad weather arrives. That could happen later this year and into next, and could signal multiple rate cuts even though the cycle has yet to begin. In the meantime, Canada will continue to watch events, over which it has little influence, unfold and hope that the turmoil isn’t too severe, it says. Globally, the outlook continues to darken. Global growth could slip to 2.3 per cent in 2020, which would be the weakest growth rate since 2009. The two key questions are will manufacturing recover before weakness spreads to investment and jobs, dragging overall growth lower and will the policy response be big enough and effective enough to offset downward pressure on global growth. Of particular concern is the outlook for trade-sensitive economies where there’s limited scope to provide effective policy support. Closed economies should fare better. It has lowered its U.S. forecast only modestly to 1.5 per cent (1.8 per cent previously) and has sufficient confidence in an effective Chinese policy response to leave its China forecast unchanged at six per cent.
Virtual Healthcare Offers Alternative Solution
Insurance carriers are starting to align themselves with virtual healthcare solutions, says Terry Power, chief executive officer of Medisys Health Group Inc. Speaking at the Benefits and Pensions Monitor Meetings & Events session, ‘Benefit Trends & Insights,’ he said plan sponsors should pay attention. In his presentation, ‘Virtual Care: The Solution At Our Fingertips,’ he showed that the Canadian healthcare system is facing tremendous pressures that are likely to grow within the next decade. As much as $16 billion is lost in productivity per year due to absenteeism and presenteeism alone and employers are paying the price. Limited access to healthcare is one of the barriers to good health, so virtual care provides an alternative point of access, he said. However, only nine per cent of Canadian employers offer virtual care as part of their health benefits packages even though 71 per cent of Canadian employees say they would use it if it was provided. A virtual healthcare platform can provide instant connection with healthcare professionals, virtual consults, and 24/7/365 service anywhere in the world, with no appointment needed. It can address common issues such as prescriptions, lab tests, follow-ups, chronic condition management, mental healthcare, and sick notes. “More and more people are seeing the value of virtual healthcare,” said Power. It is important because “connecting patients through technology supports the health and interests of individuals as well as their employers.”
Supporting Gender Diversity Helps Companies
Companies with practices that support greater gender diversity are rated more effective by their employees across a range of topics than those that do not, says an analysis by Willis Towers Watson. Additionally, companies that offer supportive family services and health education programs for women provide better environments for finding work/life balance and managing workloads. It found companies that grant a higher percentage of promotions to women generate more favourable employee views, especially opinions of senior leadership. The advantages are most apparent when at least one-third of promotions go to women. As well, companies with more women among their most-compensated staff have more favourable employee attitudes, especially for opinions of career development. The advantages are most apparent when at least one-third of women are among the top 10 per cent highest compensated executives. Offering family-supporting and health-enriching benefits, such as adoption assistance and women’s health education, are also linked with more favourable views of work/life balance and the ability to manage workloads.
ESG Sustainability Takes Long-term Focus
Sustainability for Suncor Energy is about the long term with a focus on enhancing economic and social benefits while being environmentally responsible, says Kris Frederickson, its manager of sustainability disclosure and stakeholder engagement. In ‘The Growth of Responsible Investing ‒ Integrating ESG in your Investment Strategy’ session at the ‘2019 ACPM National Conference, he said it has goals in a number areas including reducing greenhouse gases, water stewardship, and indigenous relations. It aims to reduce greenhouse gases by 30 per cent by 2030 and intends to do it not by spending and buying carbon credits which he said don’t actually reduce carbon. Water stewardship is another important consideration. Not only is it looking to reduce the use of water in its process, more important it recognizes its shared responsibility with others that use and value water. It is also working to build greater trust and mutual respect with Indigenous people. Not only does it provides jobs to Indigenous people, it invests with them, and its spending with indigenous suppliers is more than the federal government’s. Eli Angel, principal, responsible investing strategy and risk, at the Ontario Teachers’ Pension Plan, said ESG is about corporate behaviour and it has a become a huge part of the investment space. At worst, it has a neutral value, although a growing body of academic evidence shows it has a positive benefit for companies. There are many approaches ‒ ethical, negative screens, responsible investing, and impact investing. The Teachers’ approach is to integrate it through board oversight and executive team accountability. It also has four types of engagement ‒ thematic such as climate change, proxy voting, collaborative, and event driven. However, he also said its approach is constantly evolving and must because things are changing quickly.
Mental Health Treatment Is Employer Issue
Some employers feel mental health treatment is not their issue, but more are realizing they have to do something, says Chris Anderson, president and founder of Medaca Health Group. In his presentation, ‘Five Myths About Workplace Mental Health Treatment,’ at the Benefits and Pensions Monitor Meetings & Events session, ‘Benefit Trends & Insights,’ he said it’s time to look at different solutions and ideas and build them into healthcare strategies. Access to prompt and effective treatment is poor and many employees suffer needlessly, with the resulting impact on the health and productivity of workplaces. Anderson reviewed and debunked several myths about workplace mental health treatment. They include awareness has solved the treatment problem. He said “We need to work beyond awareness to solutions.” Psychiatry and psychotherapy are mutually exclusive. “Let’s work smart and use the right resources for the right employee at the right time,” he said. Telepsychiatry is an inferior option. “Let’s get on board with telemedicine,” he said. Telepsychiatry is effective across multiple age groups and clinical settings and is well adopted by patients and clinicians.” Mental illness has many direct and indirect impacts on employers. Finding access to the right treatment, at the right time, by the right professional has become a fundamental component of employer mental health strategies.
Malo Joins Provident
Michel Malo is chief investment officer at Provident. He will be responsible for investment management of the $9 billion Newfoundland public service pension plan. He has worked in various Canadian and international cities, where he has earned a reputation for his cutting-edge investment strategy and success building and motivating investment teams. Most recently, he was a senior leader in investment strategy as vice-president, investments, for Canadian National’s investment division.
Author Kicks Off HR Conference
Author and social commentator Yassmin Abdel-Magied will kick off the ‘HRPA 2020 Annual Conference and Tradeshow: Power UP HR. Now in its 78th year, the HRPA (Human Resources Professionals Association) annual conference and trade show brings together more than 4,000 HR professionals and business leaders from across North America. Keynote speakers include Terry Hickey, chief analytics officer at CIBC; Brett House, vice-president and deputy chief economist at Scotiabank; Dr. Tomas Chamorro-Premuzic, chief talent scientist at Manpower Group; and Adam Alter, associate professor of marketing and psychology at the NYU Stern School of Business. It takes place January 22 to 24, 2020, in Toronto, ON. For information, visit HR Conference