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Life insurers can do more to prepare for the impacts of a growing aging population and take advantage of the massive transfer of wealth to the next generations, a new report shows.
The Capgemini World Life Insurance Report, released Thursday, notes that the number of people over the age of 50 will reach 3.2 billion, or 33 per cent, of the world’s population by 2050. Those numbers, along with increased life expectancy, will have a “significant” impact on the life insurance market, the report adds.
It says insurers face a massive outflow of assets under management (AUM) ahead of history’s largest inter-generational wealth transfer. Policyholders over age 65 own 40 per cent of insurers’ AUM, the report notes, which for the 40 largest global life insurers totals US$7.8-trillion and is poised to be transferred to beneficiaries by 2040.
Canadian-specific data from the report shows consumers here have lower barriers to life insurance adoption, but insurers face major macroeconomic and technology challenges. It states that Canadian customers are more digitally savvy and proactive in seeking professional advice than their global peers.
The report says 89 per cent of affluent customers aged 50 and older prefer “digitally augmented interactions” with agents, while 59 per cent of affluent and mass affluent customers aged 50 and up seek professional advice to prepare for retirement and subsequent wealth transfer.
Also, 56 per cent of consumers want innovative life products, but only 26 per cent of insurers have advanced product development capabilities.
Samantha Chow, global leader for the life, annuity and benefits sector at Capgemini, based in Lutz, Fla., says insurers in Canada and worldwide need to provide more products and services that meet the needs of current and future generations.
The Globe spoke recently with Ms. Chow about some of the study’s findings:
What was the purpose of the study?
It was to better understand how insurers are helping the aging population deal with the final stages of their lives and eventual deaths. Baby boomers are relatively well equipped to have retirement products because it was ingrained into them from a young age, but there appears to be a gap in the generations after them and the transfer of wealth that will happen in the next 10 to 15 years or so. We found a lack of product innovation and a focus on talking about death, but not enough focus on aging and preparing for death.
What’s the impact of increased life expectancy on the life insurance industry?
People are aging differently; they live longer, which may mean they need more long-term care and health assistance. It’s about helping people understand how to age well, especially as they live longer. Insurers need to tackle this issue by helping people better understand the different ways they can use life insurance while they’re living, not just upon death.
How can advisors help clients make better use of life insurance?
Relationship building is key. The data show that it’s happening, to an extent, but it’s also about asking clients the right questions and engaging with their beneficiaries. Not only does that help build a relationship with the beneficiaries, but it also helps them understand what they have access to when a loved one is ill or dies.
It’s also an opportunity for advisors to educate beneficiaries on their own life insurance needs. As digital natives, millennials and Gen Z expect continual innovation and will only settle for leading-edge solutions. This trend will amplify across future generations as digitalization and enhanced personalization become the norm. Advisors also need to start pushing their carrier partners to provide more innovative products and tools to bridge the gap in life insurance ownership.
This interview has been edited and condensed.
- Brenda Bouw, Globe Advisor reporter
Must-reads from Globe Advisor this week
How trusts provide control and flexibility when transferring assets to the next generation
After mainstream options such as registered accounts are exhausted, wealthy clients often turn to trusts as a way to pass down assets to the ensuing generations. The benefits of trusts are two-fold – they generate income and can preserve capital. The distribution of the income and capital is managed by a trustee, either a third party or a family member. Clients who set up the trust have the ability to control and time when beneficiaries receive the trust’s assets. Deanne Gage explains.
Why this advisor kept her poor upbringing a secret – and how it influenced her relationship with money
In this new series, Behind the Advice, we ask advisors about their relationship with money from a young age, lessons learned over the years, and how their experiences shape the advice they give clients today. Robyn Thompson, founder and wealth consultant at Castlemark Wealth Management Inc. in Toronto, talks about growing up poor and what drove her to pursue a career of helping others build and protect their wealth. As told to Brenda Bouw.
What to consider when deciding to shut down a business
Canadian business owners have been put through the wringer over the past few years – from weathering long COVID-19-related shutdowns to post-pandemic labour shortages, supply chain snags and a series of interest rate hikes. The challenges have prompted some to shut down or sell their businesses, which advisors say present a whole host of financial, tax and estate planning implications. In the second quarter of 2023, there were 1,090 business insolvency filings, up about 37 per cent from the previous year, according to the Canadian Association of Insolvency and Restructuring Professionals. Kelsey Rolfe has more.
Why this $23-billion money manager is adding more tech and consumer discretionary stocks to portfolios
While some investors are reluctant to buy equities right now given the stock markets’ choppy performance, money manager Chhad Aul has been busy adding names in certain sectors. “We took advantage of some of the weakness through August and September and increased our equity weighting,” says the chief investment officer and head of multi-asset solutions at Toronto-based SLGI Asset Management Inc., the investment manager of the Sun Life family of mutual funds. Brenda Bouw asks what he’s been buying and selling.
Five ways grandparents can help grandkids financially other than contributing to RESPs
With the high cost of raising a child today, more grandparents are stepping in to assume some of the big expenses and, in some cases, bypassing adult kids to leave inherited assets to grandchildren instead, advisors say. Helping grandkids financially may start simply by contributing some money toward education savings, for example, says Aaron Hector, private wealth adviser and certified financial planner at CWB Wealth Management in Calgary. “I see that fairly frequently as a way to help out parents from that savings burden,” he says. Deanne Gage reports.
Also see:
How small business owners can ensure succession tax-efficiently and generate income in retirement
Why the annuities renaissance could be long lasting
Reshoring ETFs offer investors exposure to deglobalization – but will this theme pay off?
How inflation data could affect BoC’s decision on interest rates in this week’s Advisor Lookahead
What you and your clients need to know
Fund manager Emerge Canada set to wind down ETFs after efforts to sell company
Investment manager Emerge Canada Inc. will wind down its lineup of exchange traded funds by Dec. 20, after a last-ditch effort to sell the company fell through. Six months ago, regulators found that Emerge Canada did not have enough working capital and suspended its operating licence. “Emerge Canada has worked tirelessly to seek to resolve these deficiencies but has been unable to do so,” the company said in a release Thursday. “As a result, Emerge Canada has decided it is in the best interest of investors to terminate the ETFs.” Clare O’Hara and David Milstead report.
Trudeau says Alberta’s withdrawal from CPP would weaken pensions for everyone
Prime Minister Justin Trudeau is opposing Alberta’s proposal to withdraw from the Canada Pension Plan and set up a provincial alternative, warning it would weaken the national pension system for Canadians and pledging to “do everything possible” to keep the CPP intact. Mr. Trudeau sent a letter to Alberta Premier Danielle Smith saying he is “deeply concerned” about the proposed plan. James Bradshaw has the story.
For people who put work first in their life, a risk of retirement regrets
Saving well gets you roughly 50 per cent of the way to a happy retirement. The rest is about how you prepare for the social side of retirement by disentangling yourself from work and building connections to family and community. A recent survey asked retired readers about their biggest retirement successes and regrets. The 2,175 responses tell us that money doesn’t buy retirement happiness. Think of it more like a down payment. Rob Carrick explains.
– Globe Advisor Staff