The “Great Intergenerational Wealth Transfer” could be challenging for many Canadians and their heirs, since 52% don’t have a will1 – a situation that could leave Clients’ family members in a bind. Dying without a will means a government-mandated formula is used to distribute their assets – and that could mean important people in their life could be left with less – or left out completely.

You have the opportunity to start a conversation with Clients about inheritance planning – including those in the high net worth category – especially since 58% of affluent Canadians haven’t discussed their estate with heirs.2

Not always an easy conversation, but an important one

You can help Clients overcome their fears about their heirs' ability to manage their money. One way is to educate the next generation on how to manage their finances. Building relationships with Clients’ heirs is a win-win: Clients have peace of mind that their legacy plans are in place, and you’re setting the stage to bring new Clients into your business.

Discussing their legacy with Clients can bring peace of mind about the following 3 issues:

1. Family harmony

You can be the trusted advisor who helps preserve family harmony. Start estate planning conversations among family members as soon as possible. It’s better when older Clients are still healthy and family members can make rational, not emotional decisions. This can help avoid making decisions in a time of crisis when emotions are high. Ironing out estate planning issues now and sharing Clients’ wishes with their heirs avoids difficulties later. 

2. Privacy and control

Decide exactly what happens to a Client’s legacy and who knows about it. For example, insurance-based investments have advantages:

  • Beneficiary designation – can be changed when necessary, without engaging a lawyer and having to pay fees. The death benefit passes directly to the beneficiary easier and less expensively.
  • Can avoid costly and complicated probate and public records.

3. Competency

Sun Life Financial’s research shows heirs are concerned about their parents making poor financial decisions based on emotions and possibly tainted by mental incapacity. It’s important for you to get involved in Clients’ legacy plans now, to help them protect assets and manage longevity risk.

Canadians are living longer – a lot longer:

  • Just under 10,000 Canadians are centenarians, up 29% from a few years ago.3
  • On average, a man aged 65 will live to age 87, and a woman aged 65 will live to age 90.4

Remember, these are averages. Many Canadians will live past age 90, meaning they’ll need 20, 30, or more years of retirement income. Clients need to be planning to age 100 or even perhaps beyond that age.

Did you know?

  • In 2019 alone, an average of 1,260 Canadians are turning 65 – every single day! 
  • More than 5 million Canadians are in the age group of 55 to 64 years old.5

That’s a huge number of the last wave of baby boomers moving into retirement and being in retirement for longer than we’ve anticipated in the past.

Guarantees against market volatility

Clients who are in or approaching retirement might be concerned about running out of money:

  • 80% surveyed indicated they consider guaranteed lifetime income a highly valuable addition to government programs.
  • That percentage has risen dramatically… up from 60% a few years ago.6

More Canadians are thinking about securing guaranteed retirement income for as long as they live. You can help them achieve lifetime financial security that lasts through their retirement.

The period of five years before and five years after retirement is what I call the “retirement-risk zone.” As Clients are turning 65 years old, and retirement is becoming a reality to many of these people, it’s so important to:

  • discuss locking in some of the gains they may have seen over the latest, extended bull market.
  • identify opportunities to lock in some guaranteed income, which we know is important to them.
  • prepare Clients, so that if markets do turn, they’re not retiring at the wrong time and taking redemptions when markets are down.

Investors are concerned about the risk of market volatility decreasing the value of their assets:

  • 56% surveyed say the threat of volatility undermines their savings and investment goals.
  • 84% surveyed would choose safety over investment performance.7

According to this survey, guaranteed, secure income is even more important than investment performance.

Retirement income challenges

One source of protected, guaranteed income is disappearing. The article “The extinction of defined-benefit pension plans is almost upon us” predicts that the number of active employees still covered by defined benefit (DB) plans will drop very close to zero by the year 2026, seven years from now.8 The article might be forgetting that teachers and government employees will still enjoy their DB plans for some time, but the title certainly gets the point across.

Retirees who don’t have a DB plan will have to rely even more heavily on personal savings and defined contribution pension plans to generate retirement income. But there’s another challenge:

  • Over half of Canadians aren’t contributing to an RRSP or a TFSA – and many aren’t maximizing their contribution levels.9

The combination of this savings deficit and our aging population presents an opportunity.

Wealth products with guarantees

One of the Sun Life Guaranteed Investment Funds (GIFs) contracts that can provide lifetime guaranteed income is Sun GIF Solutions – Income Series. It can help give Clients peace of mind with the certainty of guaranteed income for life. Clients can lock in current or future retirement income based on the deposit amount and current interest rates – giving them the safety and guarantees they want.

Other advantages of the Sun GIF Solutions contract are flexibility and efficiency. You could take Clients through life stages with Investment Series for savings, Income Series for retirement planning, and Estate Series to help with estate planning. No other Canadian insurer has all three series on one contract. Moving money from one series to another in an existing contract is as simple as switching to a different fund code. When the underlying fund is the same, Clients aren’t subject to capital gains or losses for non-registered contacts. They don’t have to fill out an application for a new product.10

Clients moving money into Sun GIF Solutions – Estate Series take advantage of features to help them protect their legacy:

  • Pays the 100% death benefit guarantee at the greater of the death benefit guarantee or the market value at death.
  • The death benefit `guarantee protects the value of the premiums paid on death, less a reduction for withdrawals.
  • The death benefit guarantee is automatically reset – locked in and increased – each year until age 80, if the market value is greater than the current value of the death benefit guarantee.

The legacy planning that comes from beneficiary designations through segregated fund contracts is a great way to start a conversation. Ask Clients these questions to get the dialogue started:11

  • Do your heirs understand your wishes, and are you confident they’ll carry them out properly?
  • Who do you want to receive your assets when you die?
  • How do you want them to receive those assets? All at once, at defined intervals, or with a combination, for example, in a lump sum, a payout annuity, or a combination of a lump sum and a payout annuity?
  • Do you want to distribute inheritances differently among your family members, which can happen in a blended family situation?
  • Do you want to contribute to a charitable organization or special fund, and keep this contribution private?

After you have open discussions and truly understand Clients’ wishes, then you can explain the benefits of segregated fund contracts.

How does Sun Life GIFs fund performance rate?

75% of Sun Life GIFs assets are in the first and second quartile at year-end 2018.12 They can be an important component of Clients’ retirement and legacy plans.

The intergenerational wealth transfer, aging population, and desire for guaranteed retirement income have created key opportunities for you:

  • Help Clients achieve lifetime financial security and plan for their legacies.
  • Increase your engagement with Clients, their children, and their grandchildren, potentially growing your business.

Advisors, if you want to learn more about retirement and legacy planning strategies, contact me or a member of our Sun Life Wealth Sales team. For more information about wealth products with guarantees and the benefits of insurance protection, visit sunlifeglobalinvestments.com.

1 Source: Sun Life Barometer Report, 2016.
2 Source: Environics Research and Investment Planning Council/Private Wealth poll, January 2018.
3 Source: Population estimates by age and sex, Statistics Canada, 2018.
4 Source: Canadian Institute of Actuaries, 2017.
5 Source: Information in both bullets in this box from Population estimates by age and sex, Statistics Canada, 2018. 
6 Source: 2018 Canadian Guaranteed Lifetime Income Study.
7 Source: Results from the 2018 Global Survey of Individual Investors.
8 Source: Special to the Globe and Mail, October 4, 2018.
9 Source: Statistics Canada, 2017.
10 Source: Transitions from one series to another will affect clients’ guarantees.
11 Source: Note that the Clients’ entire estates likely wouldn’t be invested in a segregated fund contract. They’d have other investments, bank accounts, real estate, etc. that will also make up the estate.
12 “How seg funds weathered last year,” Investment Executive, March 2019.