The newest opportunity for seg funds is…?

by Will Ashworth16 Oct 2015
Recent statistics suggest the Registered Disability Savings Plan (RDSP) is growing in popularity.  One of the biggest beneficiaries from this savings plan could be insurance advisors – but only if insurance carriers jump on board.

A total of $3 billion in savings from 110,000 disabled Canadians was invested in RDSPs as of the end of 2014.  Although RDSPs are available through approximately 12 financial institutions including banks, credit unions and investment firms, no insurance carriers make the list at the current time.

"RDSPs are a long-term savings vehicle for people with disabilities that have been dramatically gaining in popularity since they were introduced," Carol Bezaire, vice-president of tax, estate and strategic philanthropy for Mackenzie Investments told the Canadian Press. "It provided a whole new opportunity for people with disabilities who often had been living in poverty for most of their lives to build cash flow and funds for the future."

The problem, ironically enough, is that the carriers want to ensure RDSPs are regulated through entities such as FSCO and not securities regulators such as the OSC. At least that’s the opinion of Toronto insurance consultant Sean Long.

LHP asked the veteran insurance advisor this question earlier this week in response to a comment posted by a reader earlier this summer about the potential opportunity that exists with RDSPs and seg funds.

“I'm a huge proponent of the RDSP. It's an excellent planning tool. So why I can't I find an insurance provider who offers it on the seg side? They offer every other type of plan!” commented Piper J. on August 22 in LHP. “The first carrier to offer it would attract $1M of free publicity and would likely attract a large amount of assets from plans transferring over from the MFDA side.”

Regulatory arbitrage aside, advisors could gain significant seg fund business through the availability of RDSPs. Let’s see if insurers are willing to follow through.

See more: Advisors missing critical opportunity


  • by Piper J 2015-10-16 4:09:24 PM

    Pardon? The reason insurance carriers don't/won't offer seg versions of RDSPs is because, in the opinion of Sean Long, they're not regulated by FSCO? What am I missing here? That doesn't make any sense at all! Are RRSPs regulated by FSCO? RESPs? TFSAs? Get the idea? I don't think the insurance world has seen the opportunity before them, which, quite frankly, amazes me because what is it that every family with a special needs individual ALSO needs?......Life insurance on the current caregivers to ensure that little Johnny's special needs can be maintained after mom/dad/big sis/caregiver are gone. So what's up for grabs here for a Canadian insurance company?.....massive PR, tonnes of account transfers/new money from the MFDA side, and easy permanent life sales! I don't get it?

  • by Georgetown Guy 2015-11-30 10:45:23 PM

    Over the past 5 years, I've personally asked and re-asked several leading insurance carriers, time and time again, about creating RDSP accounts and poked at why they weren't doing this. There is a huge consumer demand AND an enornmous "stickiness" to client rentention, especially when the maturity and death benefit guarantees are considered as a competitive edge to mutual funds. The response I consistently received was that their back-office computer systems weren't setup to handle the compliance oversight. They explained that this is an investment with many rules that have been constantly in flux, and that the regulatory platform wasn't stable long enough for them to invest in the technology. While I get that this is certainly a complex offering, I'm sure that if they can manage the complexities of GMWBs, RRSPs, TFSAs, RRIFs, and pensions (allso with many numerous rules based issues) -- they should be able to deal with RDSPs. But yet, there's been no traction on this. The first carrier to do this will likely walk away with the lion's share of the market. Seriously -- what's the holdup?