Who would be interested in investing in segregated funds?

Typically, investors interested in segregated funds fall into three categories:

  • Investors who are concerned with stock market volatility and the risk that their investments might suffer losses. Segregated funds are marketed to these investors as a method of participating in the positive performance of the markets, with limited downside risk. Investors are able to
    • take advantage of resets to increase the value of their guarantees and
    • switch between brand-name funds and managers at no additional charge (depending upon the insurer)
    • choose Death Benefit Guarantees depending on the issuer. (The Death Benefit Guarantee can range from 75% to 100% of the investment.)
    • ensure a quick distribution of their investment to beneficiaries of their estate by naming a beneficiary. (This would also help to reduce potential Probate Fees payable by the investor’s estate, as the asset would pass outside of the deceased’s estate.)
  • Investors who want to incorporate segregated funds in their Estate planning. Because investors can designate a beneficiary in the event of their death, segregated funds may be an easy and cost-effective method of transferring assets to their beneficiaries. Segregated funds may offer investors the following estate planning benefits:
    • The investor has the choice of Death Benefit Guarantees depending on the issuer. The Death Benefit Guarantee can range from 75% to 100% of the investment.
    • By naming a beneficiary, the investor can ensure a quick distribution of their investment to beneficiaries of their estate.
    • This would also help to reduce potential Probate Fees payable by the investor’s estate, as the asset would pass outside of the deceased’s estate.
  • Investors who are professionals and small business owners who may benefit from special features of segregated funds. Because segregated funds are covered by the Insurance Act, they offer the potential to protect the personal assets of investors from creditors. This potential benefit may be of interest to
    • Business owners;
    • Professionals;
    • Corporate Directors and officers who may be exposed to personal financial risk on behalf of the companies they represent.

Related Questions