reveals that Canadians are unsure of all their investment options. In particular, using segregated funds in a portfolio is a strategy many investors are oblivious to, says Jean Salvadore
, Director of Wealth Insurance, RBC Insurance
“We were aware there wasn’t a lot of awareness about these products,” she says. “We wanted to do a survey to assess if our gut feeling was correct. When you look at the stats it really jumps out – only 17 per cent are exploring seg-funds as part of the retirement plan.”
The study was carried out in November 2016 when a cross-section of Canadians over the age of 55 and with an annual household income of $100,000 were asked a series of questions regarding seg-funds. Their responses were telling, and largely confirmed RBC Insurance
’s suspicion that many investors simply didn’t have a lot of knowledge regarding these products.
Among respondents, 87 per cent stated they wanted an investment product with guarantees on their principal, but also offering growth opportunities. Segregated funds tick both boxes, but 60 per cent of people in the survey were unaware of this factor.
“It is similar to a mutual fund in that you can invest in a range of different asset classes,” says Salvadore. “One of the biggest differences is that segregated funds come with a guarantee on your money at maturity or at death. They also have an ability to lock in gains, so that’s why we promote it as an estate planning vehicle.”
For those nearing retirement and thinking about estate planning, the built-in security that is intrinsic with seg-funds make them an attractive proposition. This is a point the life insurance industry is keen to stress.
“You can get 100% protection on your investment should you pass away,” says Salvadore. “If you deposited $100,000 in a segregated fund, and should you pass away and the market value is less than that, your beneficiaries will still get the $100,000. It gives people peace of mind when people are planning their estate. Their children or grandchildren will get the maximum of what the market can provide, as well as downside protection so they don’t lose anything.”
The timing of this study is important as currently we are entering a transformative period in the wealth management business. Canada, or the world, has not witnessed such a mass transfer of wealth as will occur over the next decade. It makes having all your finances and assets in order that more important.
“If you look at where the market is going – with the wave of baby boomers retiring over the next 10 years it is forecast that $631 billion of financial wealth is going to be transferred between generations,” says Salvadore. “It’s a huge opportunity, so we want to make sure that Canadians are aware about this vehicle and can connect with an advisor to get more information.”
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