A recent survey by RBC Insurance found that 87 per cent of Canadians over the age of 55 want an investment product with guarantees on their principal while offering growth opportunities, however 60 per cent are unaware this is possible with segregated funds.

Principal guarantees

Some benefits of seg funds include having the growth potential of mutual funds, all while having the stability of an insurance contract that secures principal guarantees at maturity and and at death. However, only 17 per cent of survey respondents said they are exploring seg funds as an option for their retirement plan.

Higher cost might be one reason explaining seg funds’ lower profile among investors. Only 33 per cent of respondents agreed that the extra fee would be worth the added protection offered by seg funds, while 47 per cent disagreed and 20 per cent were unsure.

 Protection from market downturns

“When purchasing a seg fund, you are buying an investment with guarantees to protect your money from market downturns,” says Jean Salvadore, Director of Wealth Insurance at RBC Insurance. “For instance there is a death benefit of up to 100 per cent so that your assets are preserved for your loved ones, in addition to bypassing the probate process. Depending on risk appetite and investment goals, for many clients these benefits outweigh the additional cost of a Seg Fund.”