Remember the Beach Boys’ song “Good Vibrations”? It hit number one in several countries 50 years ago, but even today, you can hear its distinctive sounds on radio and satellite stations.

Certain wealth products also endure. Segregated fund products have been part of wealth portfolios for decades. Annuities have been around for hundreds of years. Although the details have changed, the one thing that hasn’t still attracts consumers and makes them feel good: guarantees.1

An overwhelming majority of Canadians want some of their retirement income guaranteed,2 but many surveyed don’t know the best way to get it:

  • Only 26% of Canadians are familiar with segregated fund products.
  • And just under half of Canadians (48%) surveyed are familiar with income annuities.3

“Opportunities exist for you to educate your clients about segregated fund products and life annuities and how they provide the lifetime guaranteed income Canadians are looking for,” says Michael Banham, Vice-President, Wealth Distribution, Individual Insurance and Wealth, Sun Life Financial.4 “As part of an overall retirement income plan, these products provide benefits, increase confidence and offer peace of mind in retirement, not only during volatile markets, but also in the current low interest rate environment.”

Where there’s a need, there’s an opportunity

Living longer

Almost half of today’s 65 year olds will live into their 90s. This means retirement income needs to last a long time — possibly 30 years or more.1

Canadians are living longer, and the need for their money to last in retirement helps to explain their desire for guaranteed retirement income. Additionally, there’s a need to address market performance and how down markets could reduce the value of clients’ retirement portfolios.

“With market downturns and low interest rates, you might have to have challenging conversations with your clients about lower yields and negative market performance,” says Banham. “Concentrate on the positive wealth message and reduce clients’ concerns by presenting a broad spectrum of wealth solutions that includes guarantees and growth to meet their needs.”

Risky business

  • 38% of investors are taking less risk with their portfolio now, compared with before the 2008 market crash.
  • 98% of respondents say they want some form of guaranteed income in retirement, but two-thirds don’t have any idea how annuities work.5

How to include guarantees in retirement portfolios

Have the conversation with clients about segregated fund products — also known as guaranteed investment funds (GIFs) — in the accumulation years, and as they approach or are in their retirement income years discuss the benefits of life annuities.

According to Banham, “GIFs help Canadians meet specific needs during different life stages, know what retirement income they’re guaranteed to have at a particular age, and protect their investments towards saving for long-term goals.”

For example, Sun Life listened to feedback from advisors and created Sun GIF Solutions, which includes 3 series in one product:

  • Investment Series for clients who want to grow assets and participate in the market, while protecting themselves with guarantees and insurance benefits.
  • Income Series for clients who are ready to take income in retirement and want it guaranteed for life.
  • Estate Series for clients who want to leave a legacy and have control over how their estate will be distributed among beneficiaries.

Affluent angst

25% of affluent investors worry constantly about their financial situation.

Banham believes “the guarantees and estate planning advantages in GIFs can reduce some of the anxieties even affluent investors are feeling.”

Building an income floor, similar to a personalized pension, can also ease anxieties. Life annuities are the longest-standing retirement income product, but they’re often overlooked for the following reasons:

  • they don’t offer liquidity, and
  • there’s a perception that during a time of low-interest rates, income from a life annuity will be lower than other products.

The truth is life annuities offer many benefits, most notably:

  • a guaranteed income stream with longevity risk protection, not correlated to market returns,
  • high return on equity due to the power of insurance credits, and
  • prescribed taxation for non-registered assets.

Generally, it’s best for clients to include a life annuity as only a portion of their retirement income portfolio. As a good place to start, you could suggest they allocate 25% of their retirement savings to a life annuity providing guaranteed lifetime income, to make sure their basic expenses are covered. Then, the other 75% could be invested in other products, such as mutual funds, to provide potential growth.

Reduce anxieties about longevity and market risk by bringing a combination of wealth products that provide guarantees and the potential for growth to your clients’ investment and retirement portfolios.

Guaranteed to start a conversation

  • To learn more about retirement planning strategies, contact a member of your Sun Life wealth sales support team.
  • The advisor website Sun Life GIFs contains product information, fund performance, tools and other resources.
  • With the Money for Life web app, access tools and calculators exclusively from Sun Life Financial to help your clients plan for their retirement.
  • Use the consumer-facing Annuity calculator to show clients an estimate of how much retirement income they’ll get from a life annuity and go to Payout annuities to run an illustration, access an application form, guides, brochures and more.

For clients who aren’t ready to make a decision to put their money into a GIF or life annuity, but still want guarantees, share the article Looking for steady investment return with less risk? with them about laddering guaranteed investment certificates (GICs).

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1 “Annuities: A neglected way to buy peace of mind,” Rob Carrick, Globe and Mail, February 22, 2013; “Lifetime Income Stream Key to Retirement Happiness,” Dan Kadlec, business.time.com, July 30, 2012; “Happiness in Retirement Is a Steady Income,” Alicia Munnell, Wall Street Journal, October 31, 2013.

2 98% of Canadians surveyed want some of their retirement income guaranteed, according to the 2015 Canadian Unretirement Index.

3 Previous two bullets from CANNEX/Greenwald & Associates, Canadian Guaranteed Lifetime Income Study (GLIS), August 2015. Top three box scores. 1015 participants, ages 55-75. Investable assets $100,000+.

4 80% of Canadians surveyed believe it’s valuable to have guaranteed lifetime income, in addition to government plans, (GLIS).

5 Previous two bullets from results of the 2015 Sun Life Canadian Unretirement Index.