Over the past 20+ years of my career I have been selling Segregated Funds (seg funds) to clients. Clients rarely know about how these ‘funds’ differ from traditional Mutual Funds, but once I explain it, clients quickly appreciate how they fit into their financial lives. Depending on your financial situation, they can be an excellent addition to your overall investment portfolio.
The traditional retail banks and credit unions don’t sell these products, so most Cdns don’t hear about them. I’m a little cynical about the banks, but I really feel that having an independent financial advisor from a company like Harbour Financial Group gives you access to every and all families of products.
What are Seg Funds? I like to think of them as ‘insured’ mutual funds. All the major insurance companies sell these products because they have the ability to add a number of really great features to regular mutual funds.
The best features are as follows:
A seamless way to pass on your wealth
In the event of your death, the person you choose to settle your affairs could find the process stressful. Segregated fund policies offer a simple and straightforward way to pass on your money.
Unlike some investments, the death benefit from your segregated fund policy will go directly to your beneficiaries and won’t flow through your estate and will bypass probate. This is a faster, less expensive and less stressful than other options. If the policy has a designated beneficiary, the way you choose to leave your money, and to whom, is private. We have many traditional banking clients who are telling us horror stories of settling accounts of their deceased family members. Wait times of over 12 Months are common. The banks often require many repeat trips to sign documents and jump thru multiple hoops before the beneficiaries can get their inheritance, or before the estate can be settled. It’s absolutely awful. Seg Funds bypass ALL these headaches.
Guaranteed savings protection
Seg funds give you growth potential while protecting you with maturity and death benefit guarantees.
These guarantees protect part or all your initial investment; when you reach your maturity guarantee date or pass away, if your investment is worth less than its original value, the insurance protection will top you up to your chosen percentage.
Naturally, it will be proportionally reduced by any withdrawals.
We offer 3 options to choose from based on your risk tolerance needs:
- 75/75 guarantee policy – 75% maturity and death benefit guarantees
- 75/100 guarantee policy – 75% maturity guarantee and up to 100% death benefit guarantees
- 100/100 guarantee policy – 100% maturity and death benefit guarantees
To get the guarantee, you must keep your money in the segregated fund policy until the maturity date. If you cash out your investment before the maturity date, you’ll receive the investment’s current market value, which may be more or less than what you invested originally. Plus, you may have to pay a penalty.
The Ability to ‘lock-in’ investment gains
If the value of your investment increases, some segregated fund policies allow you to “reset” the guaranteed amount to this higher value. Ask your advisor for the full details including fees for these reset options.
Potential creditor protection
Your investments could be protected even if you face unexpected lawsuits or bankruptcy. With such protection, after your passing, the death benefit will go to your beneficiaries, not creditors.
Creditor protection depends on court decisions and applicable legislation, which can be subject to change and can vary from each province; it can never be guaranteed. Talk to your lawyer to find out more about the potential for creditor protection for your specific situation.
Privacy
Your designated beneficiaries (if you decide to have them) are a private matter and won’t be disclosed. Most people don’t realize that estates that go thru probate are public documents. Most people would be appalled to know that the public can see what monies were passed along to beneficiaries. Seg funds protect families from having the general public know anything about their wealth. This is very important for business owners and for people in small towns/cities whom wish to remain private.
Segregated Funds have a wide variety of investment choices ranging for the most conservative to the most growth oriented investor. We do our due diligence with each and every client to determine your ‘investor profile’ to manage things like time horizon, investment risk, and income needs.
Please reach out to a Harbour Financial Group advisor to see if these seg fund products are right for you.
Thank you,
–Geoff