News and resources for Canada's top financial advisors
SunWise Elite CI Global Bond Fund SunWise Elite CI Value Trust Corporate Fund SunWise Elite Dynamic Power American Growth Fund SunWise Elite Mackenzie SunWise Elite Mackenzie Cundill Canadian Balanced Fund SunWise Elite Mackenzie Cundill Canadian Security Fund SunWise Elite Mackenzie Cundill Value Fund SunWise Elite Manulife Global Opportunities Fund
A growing trend?
Al Kellett, a senior fund analyst with Morningstar Canada who follows the segregated fund space, expects other insurers to follow Sun Life.
“Companies like Manulife and Sun Life have come under increasing pressure because of these insurance obligations that are tied to equity markets. In cases like Manulife, they made a decision not to hedge exposure on these contracts. As markets fell they were on the hook to [still provide the guarantees for those] who owned the contracts,” he says. “What we’re probably going to see now is the argument that fees need to go up for the insurance companies to be able to really make any money from these things.”
He adds, “I would expect that going forward these insurance players will do a better job of hedging their own exposures.”
Even with fewer features, guaranteed investments like GMWBs still play a role for the right client. In particular, there’s still value to be added by the advisor in selecting the right GMWB contract and accompanying mandate for their client.
For example, advisors can still save clients some money by comparing prices on the underlying fund mandates. Kellett points out that even under the same contract there are a plethora of different fund mandates that have grossly different price points.
“There are some funds within each contract that end up costing a lot more, possibly because of the deal made with an underlying mutual fund sub-advisor. Even within the Manulife contract or the SunWise contract there are some better choices than others,” Kellett says. “Before the recent fee changes, if you look at the CI SunWise Elite contract that can access the RBC O’Shaughnessy International Equity Fund, that combination has a total MER of 4.2% whereas within the same SunWise Elite Contract, you can, for example, purchase CI Harbour Growth and Income for an MER of 3.17%.
“There are big differences and with traditionally less volatile underlying investments, you can usually access them more cheaply.”
For now, Sun Life’s chief competitor and GMWB market leader, Manulife, has not announced fee increases on their segregated fund products. Manulife did announce some changes that will apply to new sales of its segregated fund line up to advisors back in January but the company did not raise fees.
(05/28/09)
A major insurer in Canada has eliminated features and increased fees on its popular line-up of guaranteed withdrawal benefit (GMWB) products.
Advisors and their clients will no longer be able to purchase some features, such as the 100% principal guarantee and 100% death benefit combo, on SunWise Elite Plus, a product offered jointly through Sun Life and CI Investments. Investors will have to pay slightly more for a reduced set of features — a trend that is likely to continue as insurers attempt to reconcile the cost of offering these products, which have drained their capital reserves.
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R elated Stories |
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Before the downturn, GMWBs like the Sunwise Elite Plus and Manulife’s IncomePlus were arguably the most successful product launches in more than decade. Unfortunately, they also launched while the market was riding high. When equity prices plummeted in the fall, Manulife and Sun Life were forced to set aside billions in capital requirements to ensure they could pay off the guarantees they promised for the GMWBs, which had resets that allowed investors to lock in gains.
In the U.S., GMWB providers have been rolling back features and increasing costs. It’s been assumed the same would happen in Canada, even though the Canadian product offerings tended to be less aggressive with its features and underlying fund mandates.
Sun Life appears to be the first provider in Canada to explicitly outline the changes to its segregated fund lineup, which will be effective immediately, but will only affect future purchases of products. Existing contracts must be rebalanced by December 2011.
Seg fund changes
The most significant changes are the elimination of the Sun Life SunWise Elite Full Guarantee Option Class A and the SunWise Elite Plus Class A GWMB. ,both of which offered a 100% deposit maturity guarantee and a 100% death benefit guarantee.
Any new contracts and premium deposits in these products will have to be allocated to the SunWise Elite and SunWise Elite Plus Combined Guarantee Option (Class B), which offers a 75% deposit guarantee at maturity and 100% death benefit, or Basic Guarantee Option (Class C) which is has a 75% deposit maturity guarantee and a 75% death benefit.
To reduce the volatility of the underlying investment mandates, new contracts will need to have at least 30% of the portfolio’s value allocated to fixed-income investments. There had been some mandates that offered 90/10 equity to fixed-income allocation, but they will no longer be offered to new investors.
Rocco Taglioni, vice-president of individual wealth for Sun Life, says the changes are necessary to ensure his company offers a sustainable product they can provide with confidence.
“Certainly given what’s transpired over the last eight to 10 months, [providers] have had to look at how these products are structured and how they are priced,” Taglioni says.
“We are protecting our advisors and their clients by ensuring they have viable products to meet their needs,” Taglioni says. “This is a very key aspect, it’s a great product. It did exactly what it supposed to do during the downturn — it protected those clients in those key areas.”
Sun Life has increased the cost of that protection. Price increases will vary by asset class, guarantee type, rider options and risk of funds. For regular segregated funds, the increases will range from no change to 30 basis points. The GMWB rider fee increase on SunWise Elite Plus will be anywhere from 10 to 30 basis points.
Taglioni says the average cost of protection across its entire segregated fund book of business will cost an investor about 29 basis points.
A number of underlying mandates have closed to new investment money, effective July 31, 2009. These include:
SunWise Elite CI Global Bond Fund SunWise Elite CI Value Trust Corporate Fund SunWise Elite Dynamic Power American Growth Fund SunWise Elite Mackenzie SunWise Elite Mackenzie Cundill Canadian Balanced Fund SunWise Elite Mackenzie Cundill Canadian Security Fund SunWise Elite Mackenzie Cundill Value Fund SunWise Elite Manulife Global Opportunities Fund
A growing trend?
Al Kellett, a senior fund analyst with Morningstar Canada who follows the segregated fund space, expects other insurers to follow Sun Life.
“Companies like Manulife and Sun Life have come under increasing pressure because of these insurance obligations that are tied to equity markets. In cases like Manulife, they made a decision not to hedge exposure on these contracts. As markets fell they were on the hook to [still provide the guarantees for those] who owned the contracts,” he says. “What we’re probably going to see now is the argument that fees need to go up for the insurance companies to be able to really make any money from these things.”
He adds, “I would expect that going forward these insurance players will do a better job of hedging their own exposures.”
Even with fewer features, guaranteed investments like GMWBs still play a role for the right client. In particular, there’s still value to be added by the advisor in selecting the right GMWB contract and accompanying mandate for their client.
For example, advisors can still save clients some money by comparing prices on the underlying fund mandates. Kellett points out that even under the same contract there are a plethora of different fund mandates that have grossly different price points.
“There are some funds within each contract that end up costing a lot more, possibly because of the deal made with an underlying mutual fund sub-advisor. Even within the Manulife contract or the SunWise contract there are some better choices than others,” Kellett says. “Before the recent fee changes, if you look at the CI SunWise Elite contract that can access the RBC O’Shaughnessy International Equity Fund, that combination has a total MER of 4.2% whereas within the same SunWise Elite Contract, you can, for example, purchase CI Harbour Growth and Income for an MER of 3.17%.
“There are big differences and with traditionally less volatile underlying investments, you can usually access them more cheaply.”
For now, Sun Life’s chief competitor and GMWB market leader, Manulife, has not announced fee increases on their segregated fund products. Manulife did announce some changes that will apply to new sales of its segregated fund line up to advisors back in January but the company did not raise fees.
(05/28/09)
A major insurer in Canada has eliminated features and increased fees on its popular line-up of guaranteed withdrawal benefit (GMWB) products.
Advisors and their clients will no longer be able to purchase some features, such as the 100% principal guarantee and 100% death benefit combo, on SunWise Elite Plus, a product offered jointly through Sun Life and CI Investments. Investors will have to pay slightly more for a reduced set of features — a trend that is likely to continue as insurers attempt to reconcile the cost of offering these products, which have drained their capital reserves.
|
R elated Stories |
|
|
Before the downturn, GMWBs like the Sunwise Elite Plus and Manulife’s IncomePlus were arguably the most successful product launches in more than decade. Unfortunately, they also launched while the market was riding high. When equity prices plummeted in the fall, Manulife and Sun Life were forced to set aside billions in capital requirements to ensure they could pay off the guarantees they promised for the GMWBs, which had resets that allowed investors to lock in gains.
In the U.S., GMWB providers have been rolling back features and increasing costs. It’s been assumed the same would happen in Canada, even though the Canadian product offerings tended to be less aggressive with its features and underlying fund mandates.
Sun Life appears to be the first provider in Canada to explicitly outline the changes to its segregated fund lineup, which will be effective immediately, but will only affect future purchases of products. Existing contracts must be rebalanced by December 2011.
Seg fund changes
The most significant changes are the elimination of the Sun Life SunWise Elite Full Guarantee Option Class A and the SunWise Elite Plus Class A GWMB. ,both of which offered a 100% deposit maturity guarantee and a 100% death benefit guarantee.
Any new contracts and premium deposits in these products will have to be allocated to the SunWise Elite and SunWise Elite Plus Combined Guarantee Option (Class B), which offers a 75% deposit guarantee at maturity and 100% death benefit, or Basic Guarantee Option (Class C) which is has a 75% deposit maturity guarantee and a 75% death benefit.
To reduce the volatility of the underlying investment mandates, new contracts will need to have at least 30% of the portfolio’s value allocated to fixed-income investments. There had been some mandates that offered 90/10 equity to fixed-income allocation, but they will no longer be offered to new investors.
Rocco Taglioni, vice-president of individual wealth for Sun Life, says the changes are necessary to ensure his company offers a sustainable product they can provide with confidence.
“Certainly given what’s transpired over the last eight to 10 months, [providers] have had to look at how these products are structured and how they are priced,” Taglioni says.
“We are protecting our advisors and their clients by ensuring they have viable products to meet their needs,” Taglioni says. “This is a very key aspect, it’s a great product. It did exactly what it supposed to do during the downturn — it protected those clients in those key areas.”
Sun Life has increased the cost of that protection. Price increases will vary by asset class, guarantee type, rider options and risk of funds. For regular segregated funds, the increases will range from no change to 30 basis points. The GMWB rider fee increase on SunWise Elite Plus will be anywhere from 10 to 30 basis points.
Taglioni says the average cost of protection across its entire segregated fund book of business will cost an investor about 29 basis points.
A number of underlying mandates have closed to new investment money, effective July 31, 2009. These include:
SunWise Elite CI Global Bond Fund SunWise Elite CI Value Trust Corporate Fund SunWise Elite Dynamic Power American Growth Fund SunWise Elite Mackenzie SunWise Elite Mackenzie Cundill Canadian Balanced Fund SunWise Elite Mackenzie Cundill Canadian Security Fund SunWise Elite Mackenzie Cundill Value Fund SunWise Elite Manulife Global Opportunities Fund
A growing trend?
Al Kellett, a senior fund analyst with Morningstar Canada who follows the segregated fund space, expects other insurers to follow Sun Life.
“Companies like Manulife and Sun Life have come under increasing pressure because of these insurance obligations that are tied to equity markets. In cases like Manulife, they made a decision not to hedge exposure on these contracts. As markets fell they were on the hook to [still provide the guarantees for those] who owned the contracts,” he says. “What we’re probably going to see now is the argument that fees need to go up for the insurance companies to be able to really make any money from these things.”
He adds, “I would expect that going forward these insurance players will do a better job of hedging their own exposures.”
Even with fewer features, guaranteed investments like GMWBs still play a role for the right client. In particular, there’s still value to be added by the advisor in selecting the right GMWB contract and accompanying mandate for their client.
For example, advisors can still save clients some money by comparing prices on the underlying fund mandates. Kellett points out that even under the same contract there are a plethora of different fund mandates that have grossly different price points.
“There are some funds within each contract that end up costing a lot more, possibly because of the deal made with an underlying mutual fund sub-advisor. Even within the Manulife contract or the SunWise contract there are some better choices than others,” Kellett says. “Before the recent fee changes, if you look at the CI SunWise Elite contract that can access the RBC O’Shaughnessy International Equity Fund, that combination has a total MER of 4.2% whereas within the same SunWise Elite Contract, you can, for example, purchase CI Harbour Growth and Income for an MER of 3.17%.
“There are big differences and with traditionally less volatile underlying investments, you can usually access them more cheaply.”
For now, Sun Life’s chief competitor and GMWB market leader, Manulife, has not announced fee increases on their segregated fund products. Manulife did announce some changes that will apply to new sales of its segregated fund line up to advisors back in January but the company did not raise fees.
(05/28/09)
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