By Canada Life | Nov. 1, 2023
This article was part of the rich legacy of thoughtful commentary that John Yanchus provided. We'll miss his intelligence, expert analysis and kindness and send our condolences to his family.
Since their introduction more than 60 years ago, segregated funds have experienced ups and downs in terms of their popularity. Today, they’re experiencing a resurgence.
Our report, The case and space for segregated funds, offers insight on the resurgence of segregated funds, the changing landscape of these investment solutions and the opportunity they provide for your clients. This report was recently updated to reflect the current market conditions including high interest rates and ongoing market volatility.
Global markets are still volatile, leading more investors to search for a safe haven to shelter part of their investments – segregated funds may provide that haven. Today’s segregated funds offer a variety of options and features that can enrich your toolkit, making it easier to help clients achieve their financial goals. While segregated funds originated from the insurance industry, today their evolution has proven that they are far more than an insurance wrapper.
Key take-aways
Access to diverse portfolio building blocks
- The availability of more diverse segregated fund options has helped make them relevant to a whole new generation of investors who prioritize ease, cost efficiency and customization.
- Several new options have all the benefits of segregated funds at lower fees than what has traditionally been available. This is made possible by investing in exchange-traded funds (ETFs), which are typically a cost-efficient way to participate in the market.
- Risk-averse clients might appreciate the flexibility of segregated funds in certain situations. They don’t require you to lock in your money, which helps when interest rates are rising or the markets are volatile.
- Combined with the value proposition of segregated funds, you have a growing array of building blocks to build diversified portfolios for clients – ones that are resilient enough to keep up with today’s complex market dynamics and your unique business model.
Support practice management efficiency
- Did you know that segregated funds are increasingly an option within managed solutions? This marries the diversification and sophisticated investment management inherent in managed solutions with the guaranteed options and insurance benefits of segregated funds.
Facilitate intergenerational wealth transfer
- The total amount expected to transfer within Canadian households over the decade ending 2030 is projected by Investor Economics to be $1,640 billion.1 This has cast a new spotlight on segregated funds because their unique advantages when it comes to intergenerational wealth transfer.
- “Segregated fund policies are an ideal estate planning tool as their proceeds flow directly to a beneficiary without being subject to probate taxes,” says John Yanchus, Director, Tax and Estate Planning at Canada Life. “This makes them an attractive option for those planning the transfer of their assets to the next generation.”
Get the report now to learn why segregated funds are experiencing a resurgence:
This material is for advisors only and is not intended for use with clients. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice.
Guarantees are less a proportional reduction for withdrawals, including taxes, short-term trading fees and any other applicable charges. In Saskatchewan, executors must disclose all known life insurance policies owned by the deceased, including segregated fund policies. They must list the insurance company, policy number, designated beneficiaries and the value at the date of death. Creditor protection depends on court decisions and applicable legislation, which can be subject to change and can vary for each province; it can never be guaranteed. Talk to your legal advisor to find out more about the potential for creditor protection for your specific situation.
A description of the key features of the segregated fund policy is contained in the information folder. Any amount that is allocated to a segregated fund is invested at the risk of the policyowner and may increase or decrease in value.
Canada Life and design, are trademarks of The Canada Life Assurance Company.