Advice-gap debate comes to insurance industry

By Michelle Schriver | May 12, 2023 | Last updated on October 27, 2023
2 min read
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Some industry firms are pushing back against regulatory reform for segregated funds by warning about an advice gap — a warning that also was raised, ultimately unsuccessfully, ahead of the deferred sales charge (DSC) ban for mutual funds.

The latest advice-gap warning comes from a Primerica white paper released on Thursday.

Reforms like the DSC ban — already in place for mutual funds and expected to soon be extended to segregated funds — and proposed changes to compensation in segregated funds can lead to reduced access to advice, the paper says.

“Current deliberations in Canada on advisor commissions for mutual funds and segregated funds, like the regulations implemented in the U.K., risk limiting access to financial advice, and worse, deterring wealth creation for millions of Canadians, especially those who have limited financial means,” it says.

The Primerica paper said the U.K. has seen an increase in fees of 0.25%–0.5% on assets under advisement since the reforms began to be implemented in 2013. That increase is largely due to compliance costs being passed on to investors, the paper said. Plus, a smaller proportion of firms are now willing to take on smaller clients.

Meanwhile in Canada, the Mutual Fund Dealers Association of Canada reported that in the financial advisory channel, the number of advisors was virtually unchanged from 2018 to 2020 — unlike from 2016 to 2018 when advisors in the channel decreased by 17% (or 5,681 advisors), as firms limited DSC sales ahead of the 2022 ban.

The effects of the DSC ban likely dissipated by the end of 2020, the MFDA said.

And many large dealers stopped new sales of DSC and low-load seg funds when they stopped those sales within mutual funds, Investor Economics told last fall.

More Canadians are also accessing investments online, as shown in 2020 when they opened more than 2.3 million do-it-yourself (DIY) accounts — a roughly 172% year-over-year increase, according to Investor Economics. 

Primerica isn’t alone in appealing to the advice gap to halt regulatory reform in seg funds, as submissions to the consultation on upfront commissions show.

The company has a vested interest in the status quo. As Primerica’s 2022 annual report states, a DSC ban and changes to upfront commissions, “if adopted, will require us to restructure our compensation model for sales of segregated funds and could have a material adverse effect on the life insurance products offered in Canada.”

For the year ended Dec. 31, 2022, Canadian seg funds accounted for 2% (US$195 million) of the firm’s investment and savings product sales and 3% (US$2.5 billion) of average client asset values.

The firm has about 10,500 sales reps licensed to sell segregated funds in Canada, the annual report said.

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Michelle Schriver

Michelle is’s managing editor. She has worked with the team since 2015 and been recognized by the National Magazine Awards and SABEW for her reporting. Email her at