Standard Life wants a bigger chunk of Canadians’ savings

National debt. Pension shortfalls. Relentless low interest rates. Those factors are forcing Canadians to change their savings strategies, and Standard Life PLC wants to change its business along with them, determined to carve out more market share in Canada.

The Scottish firm that made its name in the insurance business said Canada's long-term savings gap is a driving force behind its strategy to become a saving and investing company. At the beginning of 2012, Standard Life stopped selling individual life insurance altogether, and instead started to favour fee-based products that would target baby boomers and the next generation of investors. Indeed, the company has some interesting ideas about what sells and what doesn't.

"To be a pure life assurance company at a time of low interest rates isn't a very easy place to be, and you've seen the pressure that the Canadian life companies have been under in relation to their stock price," said chairman Gerry Grimstone. He, along with chief executive officer David Nish, were in Toronto Monday to explain some of their strategies before the annual Canadian board meeting. Charles Guay, CEO of Standard Life's Canadian division, the Montreal-based Standard Life Assurance Co. of Canada, was also there.

"It's anyone's guess how long low interest rates will last for, but I don't think it would surprise any of us if they last another five years," predicts Mr. Grimstone. He said that these low rates are leading to changes in customer behaviour as the lucrative baby-boomer customer looks for opportunities to earn returns while avoiding volatility.

With a period of prolonged low interest rates like that, boomers need to knock down their household debt and save money. And Standard Life thinks some of its research holds the key to communicating the importance of investing sooner rather than later.

The firm's London office invested in behavioural economics studies that suggest the idea of future carrots works better than sticks when it comes to convincing people to save. "You don't panic them. The most important thing is not to use scare stories," said Mr. Nish. "We find when individuals see a threat they do nothing." They just curl away from saving like frightened armadillos.

Standard Life learned that it is effective to show what investing will allow people to do, and imply they have choices. Canadians have already seen some evidence of this strategy being applied by London Life Insurance Co.'s recent campaign asking customers to "tell us your freedom." London Life is better known for its Freedom 55 slogan. But with fewer and fewer people retiring early, the company recently adjusted its message .

Standard Life's research also turned out some other weird tidbits about the way people react to financial messages: Don't use odd numbers, and do use dollar figures rather than percentages to illustrate things, because they're more relatable. If you're offering options, make sure there is a middle choice between the high and low extremes. "You construct your communication in a way to steer people," explains Mr. Nish.

Surprisingly, he suggests that one of the words companies may need to stop using is "pension." Because, he said, a pension is "something you put away for a long time and never get to enjoy, as opposed to savings that you might occasionally be able to access at key times when [you] need capital." Pensions make people think of broken promises, he said, and that's an echo that Standard Life hopes to reposition itself far away from.

Standard Life is not the only one that wants a piece of the boomer action, though – it's a highly competitive market and Mr. Guay believes that the company's biggest asset in Canada is the variety of products it offers. The fact that Standard Life is not a bank, for example "allows our insurance company profile to have more products on the shelf than banks since we can have annuities, seg funds, and also mutual funds and term funds in the retail space," he said.

Mr. Guay has been in the top spot for only six months, but was formerly head of National Bank Securities where he built up a depth of expertise in the wealth management business. On Monday afternoon he hosted a lunch for Canadian benefit and wealth brokers in Toronto.

Standard Life Assurance Co. of Canada is gaining some ground on the retail side where it has the fastest-growing segregated funds business franchise in the country. It may only have 3.8 per cent market share, but the executives are optimistic the division will continue to grow quickly.

To help it on its way, the company tapped Canadian markets for $400-million on Friday by selling its first subordinated debenture issue in Canada – a deal that was oversubscribed.