An income solution: how to unlock liquidity for clients

Expert explains how a CSV line of credit can supplement retirement income – and protect an investment portfolio

An income solution: how to unlock liquidity for clients

At a time when retirement income is not only a hot topic but a source of real concern for many investors, Equitable Bank’s CSV Lines of Credit option provides advisors with a potentially crucial tool.

An often misunderstood strategy, CSV Lines of Credit help you unlock tax-free cash for clients who have immediate liquidity needs, while keeping their investment portfolio intact and growing.

In partnership with Equitable Bank, WP is hosting a free webinar on May 13, starting at 1pm ET. The session will offer insights into:

  • Making the most of life insurance policies
  • Accessing cash without interrupting the growth of your policy
  • Understanding CSV products and tools

Click on this link to register, while for enquiries don’t hesitate to email [email protected]

What is CSV?

Standing for cash surrender value, it’s the real dollar value of a life insurance policy at any given point in time. For example, if someone owns a whole life policy, the death benefit might be $1.2 million and the CSV today might be $300,000, which is what that person can access or what the insurance company would give them if they decided to give up the entire policy and surrender the coverage.

What are the advantages?

Michael Pilz, Head, National Sales, CSV Lending told WP that, in viewing life insurance as an asset class, CSV has some key advantages. Firstly, it grows tax free while it remains within the policy, so as well as having the comfort of the death benefit, Canadians can experience tax-sheltered growth by funding it through their premium.

He explained: “It can be thought of like making an investment, similar to making an RSP contribution. Your premium dollars go into the insurance policy and buys you death benefits, but it’s also invested on your behalf and starts working for you, building up that dollar value.”

Another advantage, he added, is that if the advisor is also managing a client’s investment, there is a degree of preserving their book of business. By creating another source of income, there’s no pressure to grind down the client’s investments as quickly to meet their income needs.

Pilz said: “Ultimately, cash surrender value is a real-life asset a client can use to achieve whatever their goals may be. For older Canadians, they might want to supplement retirement income or to provide funding for loved ones, whether it's a down payment on a house, education or travel. We convert that cash surrender value into real life spendable dollars for someone.”

How does the line of credit work?

Equitable Bank essentially sets up a line of credit based on the particulars of the client's policy and chosen product. Pilz said it’s “true asset-based lending”, taking the value of that policy as collateral and making a portion of that available as the approved amount on the line of credit. If someone gets approved for $400,000, they can take all that money at once, $1,000 on a monthly basis or $50,000 now and the rest at a later date.

“I'd argue it's the most efficient, lowest-cost and most advantageous way for policyholder to access that embedded value within the policy,” Pilz said.

To register for the free webinar, click on this link to register, while for enquiries contact  [email protected]