Skip to main content
globe advisor weekly newsletter

This is the new Globe Advisor weekly newsletter for professional financial advisors, published every Friday. If someone has forwarded this newsletter to you via e-mail, or you’re reading this on the web, you can register for Globe Advisor, then sign up for this newsletter and others on our newsletter sign-up page.

Demand for annuities and other guaranteed investment products have been rising since the start of this year, but the second quarter is when the market really took off.

The latest data from LIMRA shows annuity sales in the U.S. hit historic new highs in the second quarter ended June 30. Total sales of US$77.5-billion is almost US$9-billion higher than the previous record set in the fourth quarter of 2008, at the peak of the global financial crisis.

While the latest data for Canadian annuities sales have yet to be released, Peter Wouters, director of tax, retirement and estate planning services at Empire Life Insurance Co., is expecting a similarly impressive surge. He spoke with Globe Advisor about his outlook for the market.

Are annuities being perceived differently now than they have been in the past?

If you ask people to describe, generically without naming the product, the features they would like in a plan in which they could save some money or generate a pension in retirement, they describe a segregated fund or a guaranteed withdrawal benefit plan, or an annuity. You tell them what it’s called and they’ll say, ‘Oh no, I don’t want one of those.’ There’s a bias in what they are, and it’s not just held by clients but advisors as well because they think they can do better. That mindset is changing.

Over the past two and a half years or so, people have found out through the pandemic how exposed they are to their health, their parents’ health, and the vulnerability of life and finances. Now, when you have a conversation about, ‘What is important to me,’ all of a sudden, annuities become a lot more attractive.

Is demand already peaking given interest rates have risen so rapidly this year?

The big hits are still to come because the biggest interest rate increases have just happened in the past month or so. The stats out there are for the first five months of the year, but since then, you’ve had [significant] increases, and they’re going to take a couple of months to sink in. Then, the word has to get out that, perhaps, now is a good time to buy a guaranteed investment certificate for part of a portfolio or maybe set aside a block of money to get a payout annuity.

The interest is really growing – we are getting a lot more inquiries. I think that some of that will take a little bit of time, especially when you’re looking at dealing with estate planners who are taking a more deliberate approach. I expect that sales will definitely start to increase over the second half of the year.

Has the client profile for those interested in annuity products changed lately?

They’re not just for older people anymore. Annuities are going to be attractive for them, but also for the number of children who have been taking care of their parents in recent years.

Now, we are going to be setting up these kinds of plans for people who are much younger. They’re not in their 70s, they’re in their 20s or 30s. It’s not a lifetime annuity either, it’s typically something over a 10-year period, so the rate is going to be the same whether it’s for a 30-year-old or a 60-year-old. We are just guaranteeing it for a period of time, and it doesn’t matter how old you are. Those discussions are becoming a much more active part of conversations that advisors and financial planners are having and that’s going to result in more sales.

This interview has been edited and condensed.

- Jameson Berkow, Globe Advisor Reporter

Must-reads from Globe Advisor this week

Is it time to reconsider your investing approach?

It’s been a tough year for most investors, with major stock indexes falling by 20 per cent or more, while fixed income investments have also fared poorly. The losses have led many to reconsider their strategies and asset allocations. While some are getting defensive during this market downturn, others see it as an opportunity for future gains. Terry Cain looks at the different strategies advisors are deploying to balance portfolios.

Do boomers’ ‘money rules’ apply to younger generations?

Save 10 per cent of what you earn, invest 70 per cent in stocks and 30 per cent in bonds and keep six months of expenses in an emergency fund. Rules like these worked well for many baby boomers, but don’t necessarily apply to younger generations. In fact, with people following so many different paths today, some advisors say the very concept of rules that apply to everyone isn’t relevant. Alison MacAlpine reports on why the advice being given today is very different from the past.

Inflation puts pressure on the ability to afford life, living benefits insurance

Rising prices and interest rates are taking a bite out of many household budgets, prompting people to take measure of their spending to cut costs. Yet, one line in their spending list that shouldn’t be reduced is insurance. Nonetheless, this facet of financial plans that addresses key risks from illness to disability and death is likely coming up in discussions with cash-pinched clients. Joel Schlesinger looks at insurance premiums and why they deserve space in budgets.

Are market-linked GICs a good bet to catch the eventual rebound?

While investors seek safety months into the current prolonged market downturn, many are also looking at ways to participate in the eventual rebound while protecting their investments. Enter market-linked GICs, which provide the safe-haven status of a GIC that so many want in today’s tumult but can deliver equities-like gains when stocks eventually pull out of their malaise. Jamie Sturgeon reports on these notes and why advisors need to be selective about how they’re structured, along with how they fit into an overall portfolio.

Also see:

Investor interest in foreign stocks highlights need for diversification amid market rout

Investors grow frustrated with hedge funds after historic losses

The future of stablecoins is commercial bank money

What you and your clients need to know

How U.S. bank dividend stocks compare

U.S. banks reported their earnings not long ago, with some boosting dividends and buying back shares in response to their success in clearing this year’s stress tests by the U.S. Federal Reserve Board. This was generally well received by the market and perhaps aided in the July rally. As a result, Sean Pugliese and Allan Meyer of Wickham Investment Counsel take a closer look at 17 banks using their investment philosophy based on safety and value.

How job postings can indicate when a stock is undervalued

There’s worrisome news coming out of some highly valued companies such as Apple Inc., Meta Platforms Inc., Tesla Inc. and Shopify Inc., to mention a few. They all have recently reported a slowdown in job hirings. This does not bode well for their stock prices, according to a recent academic paper. It posits that one way to separate highly valued from overvalued companies is to examine the rate of job postings by the companies. George Athanassakos of the University of Western Ontario looks into whether job postings can be used as an alternative piece of data to other financial information.

Buy or sell first? Softening housing market gives owners options

Inflation, interest rates and talk of a global recession have the country’s real estate markets in flux, leaving buyers and sellers wondering: What is the best course of action to take in these quickly changing times? Should they buy first? Or sell? The market is transitioning toward a more traditional one, with more choice and less competition, says an expert. Dene Moore reports on whether a more balanced market leaves buyers more room to weigh their individual financial situation and risk tolerance and then decide which is right for them.

- Globe Advisor Staff

Your Globe

Build your personal news feed

Follow topics related to this article:

Check Following for new articles

Interact with The Globe