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Hands off Seg funds, say insurance advisors

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Life Health Professional | 11 May 2015, 08:05 AM Agree 0
Insurance advisors will be facing more competition as advisors push segregated funds to try and get around CRM2 regulations.
  • john stapleton | 11 May 2015, 01:02 PM Agree 0
    I see nothing wrong with seg funds for investment purposes and for long term security. A financial advisor who actually does insurance and investments can provide high quality advice and solutions without going near mutual funds.
  • John | 11 May 2015, 01:15 PM Agree 0
    Seg funds are just mutual funds with an insurance component. I see no issue in disclosing fees of any short, whether it be regular mutual funds or hybrid investment products like seg funds.
  • Lynn Davey | 11 May 2015, 01:35 PM Agree 0
    Having both licenses is certainly a plus. I'm able to track funds that are exactly the same funds only one is a seg fund and the other isn't. Over the long term for some strange reason their performances are very close. So close, in fact I don't have an issue with using seg funds for older clients with large estates. The benefits of seg funds in the long run for older clients, I feel are well worth the slight dip in performance. The guarantee is comforting. Choose your seg fund wisely discuss the different costs and benefits with your client and let them decide what they feel is right for them. If you document your discussion and have them sign a letter of understanding perhaps involving the entire family I see absolutely nothing wrong with investing in seg funds and the decision to do so should never boil down to fees. Just my opinion.
  • Kevin O'Brien | 11 May 2015, 02:44 PM Agree 0
    I have my securities license and have my life license - so in my case it's the best of all worlds. For insurance licensed advisor's to think that CRM II won't apply to Seg funds - you may have a nasty surprise in the future. I feel that once CRM II takes effect - all clients will be asking the "how do you get paid" and "what do you get paid" questions. So my advice
    (1) Provide your clients with sound financial advice.
    (2) Become a planner not a sales person
    (3) Forget your loyalty to your supplier companies - they will through you under the bus once CRM II comes into effect (see how many mutual fund carriers will start to offer their funds directly to the investor public and endorse robo advisors).
    (4) Consider the benefits of becoming fee based....its good for the client and for you ....if you add value.

  • Taylor | 01 Mar 2016, 06:15 PM Agree 0
    With exception to those whom the maturity date is near their retirement date or specific estate planning needs, segregated funds are terrible. The fees are exorbant, going as high as 4%. The TSX 1 year return is -12%. A segregated Canadian equity fund at the top of the fee ladder would be returning -16%. Even if the TSX turns around the following year and returns 8%, the fund would only return 4%. You watch as your money erodes away.

    I know first hand many advisors who ditched their MFDA license to go all in on insurance to avoid CRM2. While seg funds can be a good product in some circumstances, they are open to abuse by advisors who aren't properly trained in investing or who are trying to charge high fees.
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