sunlife-behind-the-scenes-of-new-comparison-tool

The new Annuity & GIC income comparison tool is already proving to be a big hit. Caroline Laflamme, Wealth Sales Director for Sun Life Financial, describes how this application was created to help make your job easier, and she’s done the math to prove it.

Many of you were asking for an online tool that could be used to easily compare the income clients would receive from a life annuity to income generated from a GIC portfolio. “Advisors can now use a single, two-sided page to answer what are sometimes unfounded objections from investors, who believe that GIC rates may be higher in the future and therefore potentially provide the opportunity for higher income.” The reality is that GIC rates would have to rise significantly to provide the income sustainability of a guaranteed annuity income.

Laflamme and her sales assistant Valérie Guertin — who’s a real Excel whiz — worked on this project from January to May 2014, before handing it off to head office. A dozen or so people from the marketing, translation, compliance and technology areas were also involved with some of the more complex steps; for example, calculating the appropriate RRIF minimums for an accurate income comparison.

The outcome?

The tool successfully launched in September 2014. “We’re first in the industry to offer this type of online solution,” Laflamme says proudly.

GIC or life annuity?

Clients are sometimes convinced it’s better to wait a while before purchasing a life annuity. “Is it worth it to hold off until interest rates go back up?” they may ask. Waiting is actually a missed opportunity. “While investors are waiting to buy a life annuity, they’re not receiving the income from that product. How long will it take to get back the amount being left on the table?” asks Laflamme. “And how high do interest rates have to go for clients to make up the difference?”

The tool allows you and your clients to compare the income from a GIC portfolio to the income from an annuity purchased with the same amount of money. You can choose the interest rate they think the GICs will earn. The annuity provides income that clients can get now, guaranteed to continue as long as they live.

Life expectancy is on the rise, so it’s not surprising that an increasing number of clients want to make sure their money will last to age 95. The tool allows you to show the required return on a GIC portfolio that will ensure it can match the annuity income to age 95. It would be approximately 5%, based on current annuity pricing. But what if clients live past 95? The tool can also show the higher GIC returns needed to continue to have enough GIC assets to sustain income to age 100.

Helpful in the field

Feedback on the comparison tool has been very positive so far, and simplicity is its strong suit. “I didn’t want the calculation to produce an 8-page document, like a detailed financial plan,” explains Laflamme. The tool gives a visual representation that’s easy for clients to understand, helping you quash their initial objection. “Life annuities are a simple and transparent product, and I wanted the report to be like that too,” she adds.

Laflamme describes the potential next step: “We may very well create more similar tools for the Money for Life web app.” If upcoming initiatives are as on target as this one, the future definitely looks bright.

Sign in to sunlife.ca/advisor and go to the Money for Life web app to access the Annuity & GIC comparison tool, or talk with a member of Sun Life Financial’s Wealth sales team.

Originally published on Advisor.ca