Most high net-worth Canadians are “way overweight” in Canadian products when they should be more diversified internationally and by sector, says Paul Desmarais III, a senior vice-president of Power Corporation and Power Financial.
Desmarais told a webinar hosted by Canada Life April 29 that wealthy Canadians, especially the ultra-high net worth, are being pushed out of most public equities because they’re not able to get the same returns as they can in private markets.
So companies like Canada Life are building franchises in Canada – firms like Sagard Holdings, a multi-strategy alternative asset manager with offices around the world, and Northleaf Capital Partners Ltd., a global private markets investment firm focused on mid-market companies and assets, to help position Canada Life for the future, said Desmarais.
In turn, this will fare well for par policyholders, whose policies are guaranteed to grow in cash value as long as they pay their premiums, as well as provide them with certain tax advantages.
“In many cases, the assets that back products are not broadly available to the public – they are privately sourced,” said Desmarais. “It takes a huge amount of scale and expertise for [investors] to build those portfolios – the diversification is important” helped by private assets, real estate and international diversification.
Participating insurance
He suggested these high net-worth clients take a look at Canada Life’s blossoming participating insurance account, which has now grown to $45 billion.
Desmarais said Power Financial identified two major gaps in the Canadian market when it came to savings and wealth creation.
First, there was a large segment of the population not served by advisors because they didn’t have enough assets to be profitable or didn’t have complex financial needs. In turn, Power built Wealthsimple, a Canadian online investment management service focused mostly on millennials.
“At Wealthsimple, more than half of the people have never invested before. So you’re really just competing with the chequing account or the savings account. And my guess is that dollar-a-day insurance will bring a whole new set of clients who have never been able to afford or thought they could afford insurance in the past, into the insurance market.”
At the same time, he said there was a major gap for the wealthiest in Canada. The result was Grayhawk Investment Strategies Inc., an open-shelf firm bringing the best managers from around the world to serve the needs of the wealthiest clients – those with more than $30 million in investable assets.
Desmarais said the pandemic has forced advisors to rethink how they engage with their customers and determine the most effective way to work with them for any given situation.
A huge boom to productivity
“Our productivity and our ability to fundraise have significantly increased as a result of COVID-19. Tools like Zoom; the fact that it’s okay to ask someone for $100 million on a telephone call – is actually a huge boom to productivity,” he said. “In many cases, rethinking how you use these tools to make your practice more effective as an advisor is important.”
Advisors can’t build portfolios without scale and most managers demand a minimum investment size with private equity allocations in the neighbourhood of $100 million. Since there are not a lot of people with that kind of money, Desmarais said advisors need to look for stable, reputable companies with the ability to maintain expertise.
“All of those are irreplaceable things that Canada Life has.”
In 2020, Canada Life distributed $1.2 billion in combined open participating account policyholder dividends. Policyholder death claims totalled $738 million.
