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Many customers continue to cite fees, growth potential and market uncertainty as their main concerns. And as the cost of living increases year after year, your customers’ investments lose value. It’s important that your customers realize that saving alone isn’t enough – their savings need to retain value if they want to leave the most behind.
The solution is guaranteed investment funds (GIFs), also known as segregated funds.
GIFs are essentially investment funds issued by life insurance companies. These products solve these problems because they are guaranteed at maturity and death and can help you achieve your clients’ investment goals while protecting what is important to them, whether that is savings or estate planning.
GIFs allow customers to designate beneficiaries through their insurance contract. This simplifies the death benefit process by bypassing probate fees. Therefore, within a few days, beneficiaries gain access to the funds after receiving the necessary documentation, e.g. a death certificate.
These products are suitable for many customer profiles, in particular: pre-retirement and retired investors who want to protect their assets; self-employed clients, as unregistered assets are also protected from creditors (as long as the beneficiary is in the ascending or descending line or is irrevocable); and younger investors as they can benefit from the guarantees offered under the resets.
Desjardins offers a variety of funds under the Helios2 contract, which includes three different guarantees to suit the needs of each client.
- 75/75 warranty: This option provides the customer with a guarantee of 75% of the initial deposits at maturity (age 105). There is also a 75% death guarantee which is paid to the beneficiaries. This option offers growth potential and is most suitable for self-employed people, business owners and professionals.
- 75/100i warranty: As with the first option, this guarantees 75% of the initial deposits at maturity (age 105). At death, the beneficiary is guaranteed 100%, as well as inflation protection until the customer’s 75th birthday through automatic annual reset. This option is most suitable for clients who want their assets to be transferred quickly and easily.
- 100/100i Guarantee: This option provides comprehensive protection. It guarantees 100% of your deposits in the first year (75% thereafter) and also 100% at the time of death. It also offers inflation protection up to the customer’s age of 75 through automatic annual reset. Maturity benefits can be reset twice a year at market value to capture market gains. This option is most suitable for cautious investors who have a shorter time horizon (15 years) and want to leave something behind.
If a customer’s needs or circumstances change over time, they can seamlessly switch between warranties.
Key benefits for customers
What sets Desjardins apart is that it is the only issuer in Canada that offers inflation protection1 through 75/100i and 100/100i guarantees, which is particularly important for customers today as there are fears that inflation may increase. Even at traditional levels of inflation, having inflation protection is beneficial because it protects the client’s death benefit.
Using top-notch experienced internal and external investment managers, Desjardins monitors fund performance through rigorous research to ensure attractive growth for clients. Desjardins analyzes not only the performance, but also the investment philosophy and portfolio construction process of each solution it offers.
Desjardins offers competitive fees. Last year, it reduced its management expense ratio (MER) for all funds on the platform, as well as the guarantee fees associated with its 75/100i guarantee. Desjardins offers very attractive net prices: 30 basis points for all funds when the client’s assets reach USD 250,000. The program is automatic, so when assets reach this threshold, the client receives a discount on fees.
There is also flexibility in terms of advisor fees, with five different options. Desjardins added chargeback options in the first three or five years. GIFs are the only product on the market that offers this type of structure2.
Our focus on responsible investment (RI) is important to both Desjardins and your customers. That’s why Desjardins added two RI portfolios last year and saw a 75% increase in assets in 2020 alone.3. Desjardins currently has a total of six RI wallets.
As a result of his efforts and results, Desjardins received seven FundGrade awards last year. It was also one of the best-performing segment funds on the platform, ranking third in 2020, with 74% of GIF’s assets under management being in above-average performing funds4.
Overall, the guaranteed aspect of GIFs compared to mutual funds and other investments is a key benefit for customers. As an investment product that offers growth potential and protection at maturity and death through an insurance contract, GIFs offer incredible opportunities.
Philippe-Olivier Dumas
Head of Product Development
Legal notice: DESJARDINS INSURANCE means Desjardins Financial Security Life Assurance. DESJARDINS, DESJARDINS INSURANCE and related trademarks are trademarks of the Fédération des caisses Desjardins du Québec used under license.
An investment in principal protected bonds may not be suitable for all investors. Important information about the principal covered notes is provided in the Information Statement and the Oral Disclosure Document for each note. Investors are strongly encouraged to read this bond documentation carefully before investing and to discuss the advisability of investing in the bonds with their investment advisor or dealer representative before making a decision. In particular, documentation related to the bond issue is available on the summary page of this issue. In the event of any inconsistency or contradiction between this document and the Information Statement, the Information Statement shall apply. The offer and sale of the notes may be prohibited or restricted by law in certain jurisdictions in Canada, and the notes are not offered for sale outside Canada. Banknotes may only be purchased in jurisdictions where they can be lawfully offered for sale and only through persons duly registered and authorized to sell them. Past results are not indicative of future results. The return on principal secured bonds depends on the change (which may be positive or negative) in the value of the underlying assets over the life of the bond and it is possible that no interest will be payable to the investor. The yield on a bill cannot be determined before maturity. Some bonds may be subject to caps, participation rates and other limits that affect performance. The full principal amount of a protected note will not be repaid until maturity. Investment in bonds is subject to certain risk factors. Please read the Information Statement and Oral Disclosure Document for detailed information, including the exact formula for determining the return on a promissory note.
An investment in non-equity protected bonds may not be suitable for all investors. Bonds are different from conventional debt instruments and fixed income investments; repayment of the entire principal amount is not guaranteed (other than a minimum of 1% of the principal amount) and will be subject to risk. As a result, you could lose essentially your entire bond investment. The Bonds involve the risk of loss and are not intended to be an alternative to conventional debt instruments, fixed income investments or money market instruments. Important information about non-principal bonds is contained in the Base Prospectus, Prospectus Supplement and Pricing Supplement (collectively, the “Prospectus”) of the bonds. Investors are strongly encouraged to read this bond documentation carefully before investing and to discuss the advisability of investing in the bonds with their investment advisor or dealer representative before making a decision. In particular, documentation related to the bond issue is available on the summary page of this issue. In the event of any inconsistency or contradiction between this document and the Prospectus, the Prospectus shall apply. The offer and sale of the notes may be prohibited or restricted by law in certain jurisdictions in Canada, and the notes are not offered for sale outside Canada. Banknotes may only be purchased in jurisdictions where they can be lawfully offered for sale and only through persons duly registered and authorized to sell them. Past results are not indicative of future results. The return on non-capital protected bonds depends on the change (which may be positive or negative) in the value of the underlying assets over the life of the bond and it is possible that no interest will be payable to the investor. The yield on a bill cannot be determined before maturity. Certain bonds may be subject to restrictions, thresholds, participation rates and other features that may be reflected in performance. Because the bonds are unprotected and the principal amount will be at risk, it is possible that you may lose some or substantially all of your original investment in the bonds. Investment in bonds is subject to certain risk factors. Full information, including the exact formula for determining the return on a bill of exchange, can be found in the Prospectus.
1 Desjardinsa Competitive Analysis, September 2021
3 Source: Desjardins, September 2021
4 Source: Desjardins internal data on SocieTerra portfolios for the period December 2019 to December 2020.
4 https://www.fundgradeawards.com/2020/FundGrade-Awards-2020.aspx
