Helping your clients invest in growth while beating inflation

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Inflation is taking a bite out of everything – but there are ways you can protect your clients’ long-term investments, especially when it comes to beneficiaries

YOU CAN'T beat death or taxes – but after your death, your clients’ beneficiaries may at least be able to beat inflation. You encourage your clients to save and insure against the unexpected, but with the cost of living increasing every year, your clients’ investments are diminishing in value. In order for their savings to be optimal in future, those savings need to retain value, so that as much as possible can be passed on to loved ones. Now there’s a way to achieve this with an inflation-adjusted death benefit. Philippe-Olivier Dumas, section manager, product development, guaranteed investment funds and annuities at Desjardins, gives the example of an investment of $100,000 in an inflation-adjusted vehicle like the guaranteed minimum

Desjardins Insurance offers a wide range of flexible life insurance, health insurance, and retirement savings products and services. It has been providing innovative services to individuals, groups, and businesses for over a century. Desjardins Insurance ensures the financial security of over five million Canadians from offices across the country. It is one of the top life insurance companies in Canada and a member of Desjardins Group, the leading cooperative financial group in Canada.

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“It’s really a guarantee for people who want to maximize the wealth they will pass on to their beneficiaries while taking full advantage of market returns and protecting against inflation”

Philippe-Olivier Dumas, Desjardins

death benefit available with Helios 75/100 i. If inflation is, for example, four percent, at the end of the first year with this vehicle “your inflation-adjusted value will be $104,000, and the reset could be at that value if the market value is less,” said Dumas during a recent interview. “You’re basically cashing in the inflation amount of that year. And each year, the same occurs.” The annual reset takes place until your client turns 75, protects against down markets, and rides the benefits of markets when they are up. Once your client retires, they’re no longer working full-time, so “you really depend on the wealth you have accumulated,” Dumas said. “It’s really important to maintain your purchasing power.” Desjardins claims that this inflation guarantee is unique among Canadian financial institutions. “It’s really a guarantee for people who want to maximize the wealth they will pass on to their beneficiaries while taking full advantage of market returns and protecting against inflation,” Dumas said.

Moreover, “you avoid probate fees with beneficiary designation – you reduce delays by bypassing the estate. It becomes one less thing your loved ones have to worry about.” But what about more risk-averse clients? There’s also the 100/100 i program, which gives you 100 percent protection at maturity. “This is really aimed at investors who are more risk-averse and want to protect against bear markets,” Dumas said. And of course, it comes with the 100 i protection at death as well.

There’s another option as well that guarantees 75 percent at maturity and 75 percent at death. “The 75/75 guarantee is more comparable to mutual funds,” explained Dumas. “But it’s sold through an insurance contract, and there are some of the advantages of an insurance contract.” One of those advantages is that you can designate a beneficiary. This can be helpful for people who own their own businesses and want to protect their assets from creditors. (The beneficiary designation for this guarantee must be irrevocable or ascending/descending.)

Desjardins goes through a rigorous selection process for both internal and external fund managers who are leaders in their fields. Desjardins is able to negotiate with investment managers, “so we really are able to select the best-in-class in every asset class,” Dumas said of the company’s investment arm, which has been around for 30 years, offering “responsible investment portfolios.”

The pandemic era was a wake-up call that low interest rates and fairly predictable inflation were not to be taken for granted. While inflation has been hitting peaks unseen for decades in Canada, even a regular rate of three percent can chip away at any amount being socked away for beneficiaries, especially when spread out over decades. And inflation is a reality not just at the end of life, but during one’s life, too. “We have a dedicated team internally that only focuses on selecting and monitoring the investments that we offer,” Dumas said of Desjardins’ DSF guaranteed investment funds, offered through the Helios2 contract. The DSF gives access to the markets’ full growth potential, with an award-winning performance track record.

Another feature Dumas highlighted is competitive fees. These low fees allow clients to transfer the maximum amount to their estates. And every year, the company conducts a rigorous analysis of their management fees in order to remain competitive. Advisors’ clients can ensure that what their beneficiaries receive has been adjusted for cost-of-living increases between the time the deposits were made in the contract and the time the benefit is paid out – in spite of what may happen with the market, the death benefit increases with inflation. Desjardins also has a separate program for high-net-worth clients starting at $250,000 in investments, which boasts the same reduction of 30 basis points before taxes. To learn more, visit the Desjardins Helios2 website.

Using Helios as a tool for investment management

Published 06 Nov 2023

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Canadian inflation statistics

Sources: wowa.ca, rateinflation.com, Bank of Canada 1, Bank of Canada 2

3.3%

Canada’s inflation rate in July 2023

Canada’s inflation rate in June 2023

2.8%

Core inflation rate, according to the Bank of Canada

3.5%

Canada’s inflation rate in July 2022

7.6%

Canada’s inflation rate in June of 2022

8.1%

Rate of inflation predicted by the Bank of Canada for 2024

“It’s really important to maintain your purchasing power”

Philippe-Olivier Dumas, Desjardins

Source: Statista

The future of inflation

Further projections by the group predict a 2.39% inflation rate for 2024

It’s also projected that inflation will fall to 1.8% in 2025 and 2026

Inflation will then start to rise slightly to 1.9% in 2027 and 1.97% in 2028

According to Statista, it is projected that, by the end of 2023, Canada’s inflation rate will be 3.9%

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Using Helios as a tool for investment management

Philippe-Olivier Dumas, section manager, product development, guaranteed investment funds and annuities at Desjardins, gives the example of an investment of $100,000 in an inflation-adjusted vehicle like the guaranteed minimum death benefit available with Helios 75/100 i. If inflation is, for example, four percent, at the end of the first year with this vehicle “your inflation-adjusted value will be $104,000, and the reset could be at that value if the market value is less,” said Dumas during a recent interview. “You’re basically cashing in the inflation amount of that year. And each year, the same occurs.” The annual reset takes place until your client turns 75, protects against down markets, and rides the benefits of markets when they are up. Once your client retires, they’re no longer working full-time, so “you really depend on the wealth you have accumulated,” Dumas said. “It’s really important to maintain your purchasing power.” Desjardins claims that this inflation guarantee is unique among Canadian financial institutions. “It’s really a guarantee for people who want to maximize the wealth they will pass on to their beneficiaries while taking full advantage of market returns and protecting against inflation,” Dumas said.

Desjardins internal market watch, September 2023