I am not, naturally, a patient person. Yes, the fact that my professional life is focused on an industry known for its very-long-term thinking and, ahem, measured pace of change is ironic! I’ll never forget venting to my first boss about what I felt was slow progress on one of my projects (at a fast-paced investment bank, no less). His advice: look back 6 months, then look back a year. Change can be hard to see in real-time.
I often feel impatient with the pace of change in the pension industry, but I recently had an opportunity to take stock of the evolution of an important area of capability – pension administration technology – and was reassured by what I found.
There are typically two paths to enabling pension administration services – building custom technology or buying vendor solutions, which can be insourced to an organization or leveraged as an outsourced provider. In Canada, where we are a perpetually smaller market with unique requirements, there are only a handful of pension administration solution vendors operating at scale.
This state of play introduces complexity and risk for an administrator choosing a technology partner; pension administration technology is mission critical for administrators and vendor relationships tend to last decades. Any activity in the concentrated group of providers can have ripple effects throughout the industry.
Recently, there has been movement in a few distinct models that we’ve been talking to clients about that adds up, in our view, to positive change.
1. Major firms acquiring established players: TELUS’ acquisition of LifeWorks
In September 2022, TELUS completed the $2.9B acquisition of LifeWorks Inc., a Canadian benefits company that is also a leading provider of pension administration technology. The LifeWorks Ariel product powers 1,500 pension plans and represents ~25% of LifeWorks’ revenue. In combination with TELUS Health, the new entity becomes “one of the largest companies providing digital-first health and wellness services and solutions that empower individuals to live their healthiest lives.” This transaction expands the TELUS Health team from 2,000 to 9,000 souls, under the experienced leadership of Sid Kosaraju as President and Michael Dingle as COO, and the integration to-date has signalled the value of critical areas of pension industry-specific knowledge, such as LifeWorks’ Consulting division.
While acquisitions can be disruptive, we believe this is an exciting development. Not only does TELUS Health take an integrated view of wellness – considering physical, mental and financial elements the way our customers actually do – the deal rationale is focused on innovation and growth. TELUS brings LifeWorks the benefit of their experience in and commitment to product development, technology delivery, and client service at scale – accelerating the exact areas that can challenge the dominant players in this industry.
There are, no doubt, situation-specific risks to be managed by LifeWorks customers and we will be watching closely the new entity’s growth focus and staffing trends. However, on balance, we’re very encouraged by the ‘shot in the arm’ this transaction provides to the pension and benefits space. Continued growth by the largest players strengthens the market and can create space for new and innovative players to emerge.
2. Focused players partnering with scale organizations: JEA growing with Accenture
One of the most established Canadian pension administration technology providers, JEA, has recently partnered with leading professional services firm, Accenture, to expand their market presence, particularly into the US. JEA’s Penfax solution forms part of a suite of solutions addressing pension administration with a high degree of automation, that is bolstered by full implementation of other third-party products and system integration support from Accenture’s ranks.
While these types of partnerships with global firms can strain capacity for smaller businesses, this partnership model demonstrates an approach to ‘scaling with support’ that may further expand JEA’s install base and strengthen the organization long-term.
3. New-to-market entrants partnering for Canadian expertise
There are several solid pension administration solutions available that are based outside of Canada, which can be perceived as a potential drawback by Canadian clients. This concern is legitimate: the differences in pension regulation, plan design and practice between foreign markets and Canada are material and ‘Canadianizing’ software can be a complex and costly undertaking. Recently, however, two significant players in the market have developed a novel approach to overcoming this concern.
a. Vitech & Alight working together
US-based Vitech, “a global provider of cloud-native benefit and investment administration software”, is teaming up with Alight (formerly a part of Aon Hewitt) to improve their value proposition to the Canadian market. Vitech is focused on making excellent technology, while Alight provides advisory and delivery services rooted in their deep knowledge of the Canadian market, regulations, and clients. And it’s more than just splitting up the work: they were generous enough to meet with us to discuss their relationship and described an integrated set of choices that made my strategist heart happy. The Alight team is certified on Vitech’s toolkit, they have implemented management systems to enable communication and collaboration, and work to ensure shared incentives that motivate the right behaviours for clients. We love partnerships – and the signal it sends about the Canadian pension industry that product providers are proactively enhancing the relevance of their solutions to our market.
b. Procentia planning for growth with WinTech
Another example of focus on Canada from a different geography is the activity we’ve seen from UK-based Procentia. Procentia is a 20-year old software solution providing “a modern pension office” to the public and private sectors; uniquely, their product IntelliPen is designed to be leveraged in a modular fashion. Their brand emphasizes flexibility, simplicity, and automation.
Recently, Procentia appointed Jason Gopaul as President; with his Canadian experience, his mandate includes growth in our market. And their strategy to achieve it includes a partnership with Winklevoss Technologies, a.k.a., WinTech, a software firm providing tools that support defined benefit plan valuation, forecasting and administration processes with long-standing Canadian presence. Their goal is to provide a differentiated combination of actuarial and technology expertise to Canadian pension clients.
While winning the trust and partnership of Canadian pension administrators is not easy, we are excited to see increasing diversity among the solutions and approaches on offer to enable this core capability.
We’re watching these developments, and the investments and innovation underway at many of the other technology providers in the pension administration space. While change may come slowly, when we look back a year from now, I’m confident we’ll see even more progress toward efficient operations and empowered members. And that is what I call positive change.
Have a question about these technologies? We’re always happy to share our views; get in touch at hi@fusestrategy.co.