Toronto-based Sun Life Financial Inc. (TSX:SLF) launched a new lineup of proprietary segregated fund products Monday, some of which aim to give clients the opportunity to lock in market gains accrued by the investments each year.
The funds are divided into three product lines: Sun Guaranteed Investment Fund (GIF) Solutions, Sun Lifetime Advantage GIF and Sun Protect GIF. Some of the funds include annual resets that allow clients to lock in market value and increase their retirement income.
The reset feature offers clients the option to benefit from healthy markets, says Kevin Dougherty, president, Sun Life Financial Canada: “If the market falls, you still have [your investment’s value] locked in and if [the market] comes back and gives you some more, you lock in [your investment] at the higher level.”
The Sun GIF Solutions suite of seg funds is designed to relate to a client’s different life stages. There are three series of funds available – Investment, for clients who are building their savings; and Income and Estate, for clients getting ready for, or who are in, retirement.
Clients who opt for the Investment or Estate series can choose from more than 50 investment funds. The Income series is available on only one fund.
The Investment and Income series feature maturity and death benefit guarantees of 75%, and the estate series features a maturity guarantee of 75% and a death benefit guarantee of 100%. The Estate series funds also feature an automatic reset on the death benefit each year until the client turns 80, if the market value is greater than the current death benefit guarantee value.
Sun Lifetime Advantage GIF is meant to help clients who are five to 10 years away from retirement to move from a savings posture to creating income for retirement, says Kari Holdsworth, vice president, individual wealth, Sun Life Financial Canada.
During the accumulation years, clients with Sun Lifetime Advantage GIF may be eligible for annual resets if the total market value of their units increases. Those resets can then increase the amount that clients receive once they begin taking income. Sun Lifetime Advantage GIF features maturity and death benefit guarantees of 75%.
Sun Protect GIF, meanwhile, is designed for clients who want to protect their investments from market volatility and thus carries the highest level of protection among the new seg fund offerings.
It features a maturity guarantee of 100% of a client’s initial premium and any premiums paid before the first maturity anniversary date; and 75% of all premiums paid on or after the first maturity anniversary date. The maturity guarantee may also be eligible for resets that increase the maturity guarantee.
Sun Protect GIF features a death benefit guarantee of 100%, with annual resets until the client turns 80.
Holdsworth suggests that the fees charged by the new funds are competitive with those in the industry: “In particular, on the Estate series, we’ll be among the leaders for cost.”
The new products are a response to the findings of the firm’s research, which indicate that clients are looking for guaranteed income for life. Clients are not solely worried about market volatility but also about living longer and outlasting their income, Dougherty says.
“You think about 30 years [or more] in retirement, you’re going to see a major market event,” he says. “Every seven or eight years, you might see four major downturns that could wipe you out while you still have a lot of runway.”
The new fund line-up marks a return for Sun Life to the manufacture of its own seg funds, following a 12-year partnership with CI Investments Inc. of Toronto, during which time, seg products were co-manufactured. Although Dougherty says the partnership was successful, Sun Life saw further opportunities in producing its own products.
“What we found at the end of the day was that by manufacturing on our own, we could have a broader shelf of investment managers so [there is] more choice; we could control the design of the product more effectively; and we could make the fees more competitive,” Dougherty says.
Sun Life is not the only insurance firm to announce new seg fund products in recent months. Kingston, Ont.-based Empire Life Insurance Co. announced in April that it is expanding its lineup of seg funds by launching Empire Life Monthly Income Guaranteed Investment Fund, whose objective is to generate a consistent level of income by investing primarily in a balance of income-oriented Canadian equity and fixed-income securities.