In this article, the last in a two-part feature, Rocco Taglioni takes a look at retirement planning strategies around the themes of growth, income and protection.

During the RRSP (registered retirement savings plan) season, when you have your clients’ attention about retirement savings, it’s also a great time to open a discussion about their overall financial and retirement planning strategies.

You may find clients generally optimistic about their financial well-being. A recent survey found that a majority of Canadian investors have a positive outlook for their own financial future over the next 5 years, no matter what their age:1

  • Gen Y (34 and younger): 73%
  • Gen X (35-49): 67%
  • Boomers (50-68): 60%
  • Pre-boomers (69+): 68%

While Canadians might be positive about their short-term goals, there’s evidence they realize they’re not meeting their long-term savings goals. The 2015 Sun Life Canadian Unretirement Index found 11% of respondents are very satisfied with their retirement savings, and 33% are somewhat satisfied. That means the majority of Canadians would like to save more for their retirement.

If history is any guide, investors should also be able to trust in the long-term upward trajectory of the markets. However, one thing that could hold them back is fear: fear of uncertain economic outcomes, fear based on memories of the financial crisis, fear triggered by ongoing market events, and general fear of the unknown in a complex, fast-moving world. We may be seeing the effects of this fear through high levels of short-term and cash allocations. With an average portfolio allocation of 25% in cash, some investors could be facing lower long-term investment returns and, ironically, a higher chance of perhaps the least desirable outcome: inadequate savings for retirement.2

They also need your advice about how they’ll leave a legacy: our research shows 81% plan to leave an inheritance to their children or grandchildren.3

You can help clients meet their financial and retirement planning goals by addressing these issues and presenting solutions most relevant to their specific areas of need.

A strategy for savings success

Mixing growth, income and protection into savings strategies sets up clients for retirement success.

Investors are likely to view their retirement investments through an income, rather than a growth, lens. Almost 70% of respondents identified either income or capital protection as the top priorities for their retirement investments (above capital appreciation). It’s likely no surprise then that 41% of respondents at least “somewhat” agree that it’s “too risky” to invest in the stock market in retirement.4

According to the 2015 Investor Sentiment Report from Sun Life Global Investments, most Canadians take a “bucket” approach to their portfolios regarding growth, protection and income:

TOP PRIORITY FOR RETIREMENT INVESTMENTS
GROW PORTFOLIO THROUGH CAPITAL APPRECIATION
32%		 PROTECT MONEY ACCUMULATED SO FAR
31%		 GENERATE INCOME TO SUPPORT LIFESTYLE
37%

That shows an understanding that within retirement different investment vehicles may be more suited than others to helping cover costs such as health care, lifestyle, basic living and legacy. All investors need some amount of growth and/or income — that’s the point of investing in the first place. It’s more a question of how much, and what they’re willing to trade off to get it. To meet your clients’ needs for growth, income and protection, consider a hybrid solution.

All-in-one solution for saving, income and leaving a legacy

The new segregated fund products from Sun Life Financial fit with the Money for Life approach to retirement planning, by helping Canadians build and protect their savings so that they are able to:

  • save for a particular long-term goal,
  • meet specific needs during different life stages, and
  • with retirement income products, know how much retirement income they’re guaranteed to have at a particular age.

Segregated fund contracts offer the benefits of protection and the potential for investment growth. It’s one of those “hybrid” solutions — in this case, the ability to straddle investors’ needs for growth and protection in a single solution.

For example, in Sun GIF Solutions – Estate Series, growth and protection are equally important features. Clients can invest in the market with up to 100% of the assets in equity funds to maximize growth potential for the estate, and they can select from a wide range of investment funds across various asset classes and risk tolerances. Estate Series offers a 100% death benefit guarantee with automatic annual resets until the year they reach age 80. This means that each year, if the markets perform well and exceed the current death benefit guarantee, the guaranteed amount available to beneficiaries (the death benefit) will automatically increase.

Automatic annual resets are a valuable tool to help clients make the most of market gains.

Make investing easy

Your clients can also access world-class investment expertise by including segregated fund products and mutual funds in their investment portfolios. That’s especially good news for the one-quarter of survey respondents who could not tell how their assets are invested5 and the 38% of survey respondents who admit they’re checking their portfolio more frequently, because of market volatility.6

Segregated funds and mutual funds can simplify the investment process by placing the fund’s investment decision-making into the hands of professional fund managers. Through Sun Life Financial and Sun Life Global Investments, you can deliver sophisticated solutions to your clients via fully managed and diversified portfolios that bring together best-in-class managers and asset mix. For investment growth, the objective of mutual funds such as Sun Life Granite Balanced Growth Portfolio and Sun Life Granite Growth Portfolio is to seek capital appreciation. The objective of income funds such as Sun Life Granite Income Portfolio, Sun Life MFS Dividend Income Fund, and Sun Life MFS Monthly Income Fund is to provide a consistent level of regular income.

Depending on the life stage, legacy planning can take many forms. Clearly, a young couple may be more concerned with the risks associated with the financial impact of a pre-mature death or illness than a legacy. Those in mid- to later-life stages may be wanting to position for a legacy, as well as offset the financial risks of death or illness. In all of these situations, it’s important to have the right conversations surrounding the role the wealth side plays, coupled with positioning a more in-depth review of life and health insurance solutions. In short, it’s your opportunity to quarterback a discussion about your clients’ overall financial well-being.

Starting the financial management conversation

Financially, there’s a lot to consider. Young singles and career builders, newly married couples, young families, and those getting ready for retirement occupy busy life stages. They need to look after their immediate needs and likely have some short-term goals. Many are also worried about the future: half of those polled are not confident they’ll have enough money saved to retire comfortably. In the same poll, 4 in 10 said saving for retirement is causing them a great deal of stress.7

Asking a few questions can help clients explore their financial and retirement options around growth, income and protection — as well as remove some of the anxiety about planning for the near and distant future:

  • What are your short-term goals? Do you want to buy a home? Put kids through school? Pay down debt? Build a retirement fund?
  • Everyone needs money for groceries, clothing and housing, and often need the ability to repay any debt. What do you consider to be your “non-negotiables” or basic needs?
  • What are your hobbies and interests? How much do you spend on leisure activities and “lifestyle” each month?
  • If you were to die prematurely, could your loved ones cover your final expenses? Without your income, could they continue the lifestyle you provided for?

Answers to these questions can provide the framework for a budget, savings strategy and retirement portfolio.

Resources to start the rrsp conversation

Making regular RRSP contributions can reduce the effects of market volatility, creates the potential for investment growth, and encourages clients to take action now towards securing an enjoyable retirement. The following resources will help you position RRSPs:

  • This RRSP calculator clearly and easily shows the effects of RRSP contributions and withdrawals to clients’ retirement savings.
  • See the new Welcome to the Bright Side website and show your clients the benefits of being invested, diversified and balanced.
  • Part 1 of this RRSP series describes the effects of market volatility on investor behaviour and the resulting rules of engagement, and focuses on why building and sticking to a long-term plan makes sense for clients.

If you have questions or examples of how you treat market volatility and investment strategies, please contact a Sun Life Wealth Sales Director or send an email.

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1 MFS Investment Management report, 2015

2 Findings from 2015 Investor Sentiment Report, commissioned by Sun Life Global Investments

3 Consumer Research, Sun Life Financial, 2014

4 2015 Investor Sentiment Report

5 2015 Investor Sentiment Report

6 2015 Investor Sentiment Report

7 Findings in the previous two sentences are from an Ipsos Reid poll in February 2015.

Rocco Taglioni, Senior Vice-President, Head of Distribution, Individual Insurance and Wealth, is responsible for the overall leadership of Sun Life Financial’s distribution organizations across its Retail business in Canada. His role encompasses the leadership of the distribution company, as President Sun Life Financial Distributors Inc., as well as the Insurance and Wealth wholesaling sales organizations. Through the various leadership teams he oversees the development, direction, and execution of the Distribution strategies centered on wealth management, protection, retirement, and estate and financial planning.

Since joining Sun Life in 2004, Rocco has held various executive leadership roles, including Vice-President Business Development, Group Benefits; Head of Individual Wealth Management; Senior-Vice-President, Client Solutions; and most recently Senior Vice-President, Distribution and Marketing, Individual Insurance and Wealth. Throughout his tenure at Sun Life, Rocco has led various business strategies centered on building, transforming, and evolving organizations and teams to drive higher levels of performance and success.

Rocco has 36 years of experience in strategic leadership in the insurance and investment industries. He has served on and is a member of a number of boards. Rocco is currently President and Chair, Sun Life Financial Distributors (Canada) Inc. and is a member of the Sun Life Financial Investment Services (Canada) Inc. board. He is a member of various industry associations, including Advocis, GAMA Canada, the Canadian Pension and Benefits Institute, and the Association of Canadian Pension Management.

Rocco holds a Bachelor of Arts in Economics from York University.