OPTrust Bolsters Senior Leadership Team

Earlier today, I spoke with Peter Lindley, President and CEO of OPTrust, and I discussed some restructuring taking place at the organization's leadership team:
  • Audrey Forbes is promoted to Senior Vice President, Member Experience and will report to Peter, and will become a member of the executive team.
  • Kelly Glass will join the OPTrust team and assume responsibility as Senior Vice President, People, Communications & Public Affairs. Kelly will report to Peter and will become a member of the executive team. 
  • Rick Votano will continue as Vice President, Information Technology, Program Delivery and Business Support Services and will, on an interim basis, join the executive team and report directly to Peter. 
  • Dani Goraichy is promoted to Chief Risk Officer and Senior Vice President Actuarial Services and Plan Policy (ASPP). Dani will report to Peter and will become a member of the executive team. Dani will continue to oversee the ASPP team and the Risk functions will also report to him. This includes Investment Risk, Compliance and Enterprise Risk.
  • Julie Belair is promoted to Vice President, Actuarial Services and Plan Policy, directly overseeing the ASPP team.
  • Tracy Hatanaka-Lejnieks to assume the role of Chief Financial Officer on an interim basis, reporting to Peter and she will become a member of the executive team. 
  • Karen Danylak will become VP of Corporate Affairs. She will continue serving as a member of the executive team.
  • Louise Greig will assume the role of Corporate Secretary
  • John Walsh (General Counsel) has informed OPTrust of his intention to leave in February 29th of next year to pursue other opportunities. John has a long and successful history with OPTrust, not only building Legal Services, but playing a key role in building our highly successful Private Markets Group.
  • Reg Swamy (former Chief Pension Officer) is leaving OPTrust.
  • Doug Michael (former CFO) is leaving OPTrust.
You can see the new structure of the leadership team here.

Peter began with his most important appointment, Audrey Forbes, who now joins the senior management team as an SVP, Member Experience, the most important focus at OPTrust:

As stated above, Ms. Forbes was instrumental in shaping the direction of OPTrust's member services experience. Since joining OPTrust in 2001. she has held increasingly senior leadership roles and is an active participant on many Committees including the OPTrust Diversity Council.

Peter and I spoke at length about diversity and inclusion. He firmly believes that for effective decision making to take place, gender diversity and inclusion are very important. "Organizations that have cognitive and gender diversity have better outcomes."

I couldn't agree more. In fact, I told him that in my opinion, diversity is easy, it satisfies the bean counters, but inclusion is much harder because it takes a certain cultural mindset that looks to empower employees no matter their race, gender, ethnicity, disability or religion.

He agreed with me stating "we need to address our subconscious biases" and added that inclusion and diversity isn't only about gender, "it's also about ethnicity and hiring disadvantaged groups like "people with disabilities and indigenous peoples".

Mr. Lindley was proud that he appointed four women to the executive team, exactly half of the executive team of eight.

And he also told me that they are in the process of hiring another talented lady which will assume the role of senior managing director responsible for sustainable investing and innovation (announcement will be made very shortly) to replace Katharine Preston who left OPTrust to join OMERS as a VP, Sustainable Investing.

According to Peter, this new person will assume a very important job as he has already told me that sustainable investing is something he holds dear to his heart and believes in very strongly. In terms of the innovation component, he told me "it's not innovation in the broadest sense, but rather innovation in the energy sector as 8% of our portfolio is in renewable energy as opposed to less than 3% which is in traditional energy."

He also added this person will be looking across public and private markets to implement and enhance ESG standards and she will be reporting to James Davis, OPTrust's CIO who is an expert in sustainable/ responsible investing.

He told me there will be an "increased focus on responsible investing":
For OPTrust, the purpose of responsible investing lies in the recognition that ESG factors can impact investment risk and return. We seek to identify, assess and manage ESG factors in a manner that supports both our mission to deliver sustainable pension security and our fiduciary duty to our members.

The context for OPTrust’s responsible investing program is set out in three policies approved by the Board of Trustees; the Statement of Investment Policies and Procedures (SIP&P), Statement of Responsible Investing Principles (SRIP), and Proxy Voting Guidelines.

What else? I was thrilled to learn Dani Goraichy was promoted to Chief Risk Officer and Senior Vice President Actuarial Services and Plan Policy (ASPP). Dani will report to Peter and will become a member of the executive team. He will continue to oversee the ASPP team and the Risk functions will also report to him, including Investment Risk, Compliance and Enterprise Risk.

I have spoken to Dani a couple of times and he's an extremely nice and super sharp actuary. The fact that Peter took OPTrust's senior actuary and made him a Chief Risk Officer tells me a lot. Not only does he have full confidence in Dani's capabilities and leadership, he also maintains the focus on OPTrust's funded status, by far the most important thing to any pension.

This is important because I asked Peter why keep the nomenclature "OPTrust's funded status report" and not simply change it to "annual report" which everyone else uses and he told me it's because maintaining a fully funded status is their priority and "typically people look at annual reports, the headline numbers and how much a CEO and CIO were compensated."

He rightly added: "It's not just about overall return, it's about the risk you're taking to deliver those returns, and if you take undue risk, it can negatively impact your funded status."

Peter spoke very highly about Dani Goraichy telling me "he's a gem" and "was an instrumental architect of OPTrust Select."

I agree and bring to your attention a couple of things. Jason Heath recently wrote a comment for the National Post that a workplace pension could be worth three times an RRSP — yet only 37% of Canadians have one. Take the time to read it here.

And in the new edition of the Association of Canadian Pension Management Observer, Dani Goraichy, OPTrust's new Chief Risk Officer and Senior Vice President Actuarial Services and Plan Policy, explains how OPTrust Select was designed specifically for the needs of the nonprofit sector:
There was a time when defined benefit (DB) pension plans were common in Canada. In 1977, one in three Canadians working in the private sector were members of an employer-sponsored defined benefit pension plan. Now, only one in ten workers have a DB pension. Before becoming the head actuary at OPTrust, one of Canada’s largest defined benefit pension plans, much of my career was spent helping companies wind-up their pension plans as a consulting actuary, so I’ve seen the impact firsthand.

The shift has been gradual, but the trend is clear; fewer and fewer Canadians will have access to the security and stability of a defined benefit pension, and that has left a significant void to fill. For the nearly one million workers in Ontario’s nonprofit sector, the numbers are even more stark. The Ontario Nonprofit Network (ONN), the independent network of the 58,000 nonprofit organizations in Ontario, has been working for years to support Ontario's nonprofits, including exploring pension plan options for the sector.

Through their research, the ONN found that while employers in the nonprofit sector want to provide their employees with retirement security, DB pensions are often out of reach due to their cost, administrative burden, and most importantly, the impact of uncertain contributions on their budgets. This is especially true for smaller employers. It was with this fact in mind that we created OPTrust Select, the new defined benefit pension offering for workers in Ontario’s charitable, nonprofit and broader public sectors. OPTrust Select was designed to address the specific needs of these sectors, providing the security and stability of a defined benefit pension, but at a moderate and stable cost.

Achieving this, however, was no easy task. In order to meet the needs of contribution stability for employers, while providing workers with the lifetime retirement income of a DB pension, a tailored plan design was imperative.

Focusing on the core benefit

Because of budgetary constraints for employers, and more modest incomes for employees, we knew that the cost of a typical defined benefit plan was too steep and unpredictable for most nonprofits. Our research found that a contribution rate of 3% per side from employers and employees struck the right balance of making a meaningful contribution for retirement, without significantly impacting their monthly cost of living.

With the goal of providing the greatest level of retirement income at a lower contribution level, we focused our attention on the core benefit, removing valuable, but costly, ancillary features like early-retirement benefits and subsidized joint and survivor benefits. Ultimately, we were able to build a plan that produces approximately half of the lifetime benefit of our primary plan design, but at only a third of the cost.

Minimizing contribution rate volatility

One of the primary concerns voiced by the nonprofit sector was the risk of rising contribution rates. In a typical DB arrangement, if a plan is underfunded, the only options are future benefit reductions, or contribution rate increases. For a sector dependent on precarious funding sources, this risk is prohibitive. With OPTrust Select, we added additional levers to minimize volatility of contributions.

Under our primary schedule of benefits, members receive automatic indexation upgrades annually. Under OPTrust Select however, cost of living upgrades both before and after retirement are dependent on the funded status of the plan. This means if we are ever not fully funded, a proportion of cost of living upgrades will be paid depending on the level of funding of the plan. While the intention is to pay the upgrade in full every year, this conditionality leads to a significant reduction in the risk of contribution rate increases for employers and employees alike, addressing one of the greatest concerns we heard from the sector.

Increasing portability of pension

In September 2018, following years of research, the ONN’s Pensions Task Force recommended OPTrust Select as the pension plan of choice for organizations in the nonprofit sector. Their goal in recommending one plan was to maximize pension portability across the sector, and the response has been incredible.

As of writing this, 21 nonprofit organizations from across the province have joined OPTrust Select, resulting in close to 800 new members and a nearly two per cent increase in OPTrust’s total plan membership. We’ve heard interest from hundreds of additional employers, and there are a further 60 organizations currently in our application process. It is our hope that one day, workers in the nonprofit sector will be able to move throughout their careers with the security and stability of a defined benefit pension.

Replicating the model

OPTrust Select didn’t happen overnight. In fact, it’s an idea that was nearly 25 years in the making, but the lessons we’ve learned can be applied elsewhere. By focusing on the needs of our target market and leveraging our existing size and scale, OPTrust Select is able to provide the stability and security of a defined benefit pension, but at a moderate and stable cost. This is a model that can be replicated by others across the country.

A recent study by the Canadian Public Pension Leadership Council found that DB pensions “are not just better for Canadian workers, but for the Canadian economy overall” and they resulted in “lowered job stress, improved worker health and lower use of government funded assistance programs.” We are advocates of the defined benefit pension plans as the most efficient method to achieve financial security at retirement, and we stand ready to help those looking to replicate, and indeed, improve on our model.
Like I said, Dani is a really sharp actuary and Peter Lindley can now lean on him as he has assumed a much more important role looking after all the risks at the organization, especially funded status risk.

Lastly, Peter told me he's looking forward to starting the new year with his new management team. I wish them all much success and I congratulate Peter once again for the arrival of his new granddaughter, she will one day be very proud of her grandfather and how he implemented diversity and inclusion at the organization he leads.

Below, Peter Lindley, CEO of OPTrust, joins BNN Bloomberg's Catherine Murray for a look at the Canadian pension landscape and how he's facing the major shifts that pension funds are experiencing and the headwinds ahead.

I also embedded a clip where Chris McKnett, one of Peter’s mentors, makes the case for sustainable investing to large institutional investors. It really is a great Ted Talk, well worth watching it.