(February 5 – 14:50 ET) – The Canadian Association of Insurance and Financial Advisors says that advisors should prepare for an influx of consumer questions prompted by the new rules for segregated funds.

New capital requirements from the Office of the Superintendent of Financial Institutions will likely make it more expensive for most life insurance companies to offer seg funds. Many life insurers are responding to increases in their reserve requirements by raising MERs, reducing the 100% guarantee to 75%, or by limiting the number of resets allowed.

“The market for mutual funds and segregated funds may be at the mature stage of a product cycle,” notes Jim Rogers, chair of CAIFA. “Both product types have to compete harder to increase their share of the retirement savings dollars of Canadians. If the cost of investing in a seg fund rises, or the benefits provided by seg funds are trimmed back, the competitive advantage of seg funds relative to mutual funds will be reduced.”

Rogers suggests that advisors need to put more emphasis on the potential creditor proofing and estate by-pass features of seg funds, since these features remain unimpaired by recent changes to the seg fund products on the market.
-IE Staff