The case and space for segregated funds

Are your clients seeking shelter from market volatility?

The case and space for segregated funds

This article was provided by Canada Life.

Since their introduction more than 60 years ago, segregated (seg) funds have experienced ups and downs in terms of their popularity. Today, they are once again experiencing a resurgence.

Our latest report offers insight on the resurgence of seg funds, the changing landscape of these investment solutions and the opportunity they provide for your clients.

Global markets are still volatile, leading an increasing number of investors to search for a safe haven to shelter part of their investments – seg funds may provide that haven. Today’s seg funds offer a variety of options and features that can enrich your toolkit, making it easier to help clients achieve their financial goals. They originated from the insurance industry, but today their evolution has proven that they are far more than an insurance wrapper.

"There’s a whole generation of investors whose expectations and preferences have been shaped by living through the volatility and global economic uncertainty of two major market events – first the 2008 global financial crisis and now a global pandemic. For many investors, risk-conscious portfolio construction is critical.”

Steve Fiorelli, Senior Vice-President, Wealth Solutions, Canada Life 


Key take-aways

Access to diverse portfolio building blocks

  • The availability of more diverse seg fund options has helped make them relevant to a whole new generation of investors who prioritize ease, cost efficiency and customization.
  • Several new options provide access to the benefits of seg funds at lower fees than what has traditionally been available. This is made possible by investing in ETFs, which are typically a cost-efficient way to participate in the market.
  • Risk-averse clients might appreciate the flexibility of seg 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 seg funds, you have a growing array of building blocks with which 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.

Seg funds support practice management efficiency

  • You might not be aware that seg 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 seg funds.

Facilitate intergenerational wealth transfer

  • The total amount expected to be transferred 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 seg funds due to 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:

The Case and Space for Segregated Funds

1Family Matters (Winnipeg: IG Wealth Management),

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, and Canada Life Investment Management and design are trademarks of The Canada Life Assurance Company.