> The Role of Insurance in Wealth Planning

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1 > The Role of Insurance in Wealth Planning Guaranteed investment solutions ASSANTE ESTATE AND INSURANCE SERVICES INC.

2 Guaranteed investment solutions A common perception is that guaranteed investment vehicles may lack the necessary performance to fulfill your investment goals. However, solutions involving insurance products combine guarantees with enhanced performance. Guaranteed vehicles to meet your investment objectives Many investors have a great interest in holding at least some percentage of their portfolio in guaranteed investments. And it is widely believed that the Guaranteed Investment Certificate (GIC) is the only such vehicle available. Of course, in today s low interest environment, the GIC is less than ideal for meeting many people s investment objectives. Fortunately, other investment vehicles are available from the insurance world products that are required by law to provide certain built-in guarantees. At Assante Estate and Insurance Services, we offer insurance products and strategies with guarantees that you may wish to include in your investment portfolio, either now or at a future stage in your life. We call them guaranteed investment solutions.

3 Three of the most widely used guaranteed investment solutions are: Segregated funds: > Segregated funds are the insurance industry s version of mutual funds. Similar to mutual funds, you can choose from an almost endless variety of funds covering virtually every asset class and investment style. Unlike mutual funds, you receive guarantees on your capital and potentially on your growth. As a guaranteed investment solution, segregated funds are typically used for the equity portion of your portfolio. You gain the potential for higher returns while receiving guaranteed protection of your capital. Universal life insurance: > Although it s an insurance product, universal life insurance also includes an investment component where you can invest in equities, bonds, cash and guaranteed investment accounts. All investments grow in a tax-sheltered environment. When utilized as a guaranteed investment solution, you invest only in guaranteed investment accounts similar to GICs. Thanks to tax-sheltered growth, guaranteed accounts in a universal life insurance policy can provide greater wealth accumulation than using similar non-registered investments. Insured annuities: > An insured annuity is a combination of two insurance products a life annuity and a life insurance policy providing lifelong coverage. The annuity provides a guaranteed stream of retirement income, and the life insurance policy provides guaranteed estate planning benefits. You can receive greater retirement income compared to non-registered investments, while creating a legacy for your heirs. Whole life insurance: > Whole life insurance is another type of insurance product that is bundled with a tax sheltered investment component. With whole life insurance, the asset mix of the investment component is set and managed by the insurance company for the entire policyholder base. A policyholder cannot have a unique, self directed investment allocation. The investment account is similar to a balanced portfolio, and the growth of the policy is determined by, among other things, the growth of the investment portfolio and whether the growth is better or worse than originally anticipated. The cash value in a whole life policy can never go down, it can stay unchanged from year to year, or grow faster or slower than anticipated, but never go down.

4 When to choose a guaranteed investment solution Solutions meet your needs for equity or interest-bearing investments, or retirement income. When to choose segregated funds Segregated funds are like mutual funds, but with a safety net. The money you invest is guaranteed in two ways. First, regardless of how the markets perform, your capital is guaranteed for a specified period after you made your investment, and you can choose a 75% or 100% guarantee. Usually the specified period for the guarantee is the end of 10 years, and there is no guarantee on the holdings if you wish to sell them earlier. Also, you can name a beneficiary, and in the event of your death the beneficiary receives the market value of your investments or the guaranteed amount of your capital whichever is greater. In addition, you can choose segregated funds that include a reset feature, which allows you to periodically lock in gains typically, twice a year. If you invested $10,000 and it grew to $10,700 later in the year, you could lock in the $10,700. The new amount is now guaranteed for 10 years from the reset date. You are guaranteeing capital plus growth. You may want to use segregated funds for the equity portion of your portfolio if any of the following factors apply to your situation: > Your business or career makes creditor protection important: In addition to guarantees, segregated funds can also provide creditor protection, provided you name a spouse, child, parent or grandchild as beneficiary. This feature makes segregated funds very appealing if you are self-employed, a business owner, or the director or officer of a company. > You have a lower risk tolerance: If your tolerance toward risk makes you somewhat of a conservative investor, you will most likely appreciate that segregated funds protect your capital against market volatility over the long term. Some of the more common reasons for having a lower risk tolerance are: Your personality is such that you become anxious and uncomfortable during inevitable market downturns, perhaps even tempted to sell investments that decline in value. You have a family situation that calls for safety of capital over the coming years such as children heading toward post-secondary education or aging parents depending on you for some financial support. You re in the process of building your own business and cannot risk lost savings. You are nearing retirement or retired and don t want to risk losing principal, as you are counting on investment income for retirement and can afford less time for falling markets to recover. In fact you are very tolerant toward risk and are heavily invested in high-risk securities, but you want to add guaranteed investments to anchor your portfolio. > You want additional estate planning benefits: Segregated funds not only offer a guarantee on your investments that go to your beneficiaries, they also flow directly to beneficiaries without going through probate. This minimizes probate fees and avoids costly delays.

5 When to choose universal life insurance This guaranteed investment solution suits investors who would like to allocate a portion of their portfolio to guaranteed investments, but want a more financially rewarding vehicle than non-registered GICs. A key downside to investing in GICs in your non-registered portfolio is the annual taxes you must pay on investment income. But within a universal life insurance policy you can invest in Guaranteed Investment Accounts, where your investments grow tax-sheltered. You also purchase life insurance as part of the policy, but the money you spend on insurance premiums can be less than the taxes you would pay on equivalent GICs in a nonregistered portfolio. As a result, you can accumulate significantly more wealth using universal life insurance, especially over longer periods. Ultimately, your investments can be used to supplement retirement income, or to provide a legacy for your heirs or a charity. When to choose whole life insurance This guaranteed investment solution suits investors who would like to allocate a portion of their portfolio to guaranteed investments, but want a more financially rewarding vehicle than non-registered GICs. A key downside to investing in GICs in your non-registered portfolio is the annual taxes you must pay on investment income. But within a universal life insurance policy you can invest in Guaranteed Investment Accounts, where your investments grow tax-sheltered. The cash surrender value can utilized in the same way as Universal Life discussed above

6 When to choose an insured annuity This guaranteed investment solution suits people in retirement who want an alternative to GICs or other fixed income investments, as a means of supplementing their retirement income. The problem with traditional fixed income investments, of course, is the less than desirable income due to prevailing low interest rates. And the problem is compounded by interest income being taxed at the highest marginal tax rate. You can typically receive increased retirement income using an insured annuity. First, you purchase a life annuity with a lump sum of nonregistered funds. The annuity provides a stream of equal payments, guaranteed for life. This income is part interest, part return of capital, and only the interest portion of these payments is taxable. Income from traditional non-registered investments is fully taxable. Consequently, your after-tax income from the annuity can be significantly greater than that of non-registered fixed income investments. Now, for estate planning purposes, you insure the annuity. You use part of your annuity payments to pay for a life insurance policy, and the death benefit is equal to the lump sum you used to purchase the life annuity. The death benefit goes to your heirs or a charity tax-free. So if you purchase a $250,000 life annuity, your heirs will eventually receive $250,000 in tax-free insurance proceeds. In essence, you have preserved your capital; your original investment is being returned, and goes to your heirs. Meanwhile, you can receive significantly more annual income compared to the non-registered alternative, even after paying the insurance premiums.

7 Guaranteed investment solutions: Part of an integrated approach Utilizing our guaranteed investment solutions is part of an integrated approach to wealth management, an approach that s essential to Assante. These solutions not only include the two distinct components of insurance and investments, but the financial needs they meet involve the entire spectrum of wealth planning. Guaranteed investment solutions may apply to risk management, tax and financial strategies, and wealth transfer. Consequently, your Assante advisor consults with specialists from Assante Estate and Insurance Services Inc. and any of your own professional advisors before recommending any guaranteed investment solution as part of your wealth management program. For more information For additional information, or to learn more about Assante Estate and Insurance Services Inc., please contact your Assante advisor or visit This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. This material is not intended to provide, and should not be construed as providing individual financial, investment, tax, legal or accounting advice. You should consult your professional advisor(s) prior to acting on the basis of the information herein. The Assante symbol and Assante Wealth Management are trademarks of CI Investments Inc., used under licence _E (06/17)

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