The growing use of life insurance by the well-heeled has introduced another asset class to their investment portfolios – a trend advisors hope will trickle down to the other 99 per cent of Canadians.
The growing use of life insurance by the well-heeled has introduced another asset class to their investment portfolios – a trend advisors hope will trickle down to the other 99 per cent of Canadians.
“They have their business assets, they have their real estate, they have their equity, their fixed income and then they have their tax preferred insurance,” said Steve Santoro, CFP and investment representative with Santoro Financial Group. “Life insurance has become an additional asset class.”
The ultra-wealthy have long been aware of the benefits of life insurance but now there are growing numbers taking advantage. “The amount of ultra-affluent people who are buying the whole life product has increased,” said Santoro.
He points to four trends precipitating whole life’s rise in popularity among this demographic:
“They have their business assets, they have their real estate, they have their equity, their fixed income and then they have their tax preferred insurance,” said Steve Santoro, CFP and investment representative with Santoro Financial Group. “Life insurance has become an additional asset class.”
The ultra-wealthy have long been aware of the benefits of life insurance but now there are growing numbers taking advantage. “The amount of ultra-affluent people who are buying the whole life product has increased,” said Santoro.
He points to four trends precipitating whole life’s rise in popularity among this demographic:
- One of the primary factors is high Canadian tax rates. “We have the highest tax rate now at 4953 and the corporate tax rate of 4617 so the wealthy are using this as a tax preferred alternative to their fixed income,” he said. Instead of putting it in traditional structures they’re using insurance as a part of the overall plan.
- Increased volatility has been a boon for brokers because it makes people fight for safety. “That means more money would maybe go to fixed income,” says Santoro.
- Aging is also playing a role as the maxim of people taking on less equity as they get closer to retirement holds true. “There’s more preservation of capital as people age and the people who have all the money right now are the baby boomer generation, comparatively.”
- Low interest rates also plays a role.
