Seg fund sales skyrocket among largest players

By Reynaldo Marquez | March 18 2006 08:44PM

At the ten largest segregated fund suppliers, net sales hit the stratosphere in the past year. Sales skyrocketed by 40% in 2005 compared with 2004.

A recent ranking by the firm Investors Economics reports that net segregated fund sales in 2005 topped $3.6 billion among this elite group. Nine of the players in the top ten experienced major sales growth. The exception, TD Asset Management, saw sales plummet by 43% during the same period.

According to the research firm, net sales for the whole industry in 2005 amounted to $3.4 billion.The fact that total sales in 2005 are lower than sales for the top ten is explained by redemptions. It is also an indication that the growth of the biggest players was made at the expense of the smaller ones.

Boasting the most spectacular gain, Standard Life Canada saw its net seg fund sales grow by 331.4%, from $35 million to $151 million between 2004 and 2005.

During the same period, net sales of Empire Financial Group’s seg funds mushroomed by 152.9%, from $140 million to $354 million.

Insurer Primerica Life Canada also enjoyed a strong upswing in net sales of segregated funds, equal to growth of 109.5% in 2005 compared to 2004, from $127 million to $266 million.

Great-West Life, which has steadily consolidated its presence in this sector over the years, reinforced its penetration of the segregated fund market in 2005. The company’s net sales were up 40.9%.

At more than one star seller, a sound business development strategy delivered the goods. Les Herr, vice-president, distribution and individual strategy at Empire, explained that a few years ago his firm introduced its products electronically through FundSERV, which largely fuelled sales growth.

Mr. Herr confirmed that FundSERV opened up new distribution channels for Empire. Using this electronic platform helped the company’s segregated fund line emerge from the shadows and make a name for itself among a larger clientele.

Empire’s sales, he continued, were also bolstered by managing general agencies (MGAs). Mr. Herr pointed out that the insurer is reaping the fruits of its efforts to cultivate business relations with the MGAs. Just a few years ago, the insurer was working almost exclusively with personal producing general agents, (PPGAs), a network that is particularly strong in Ontario and Western Canada.

“We had developed early on a greater penetration of the MGA channel for the life side of the business. And so, obviously, once we developed that relationship and built some confidence, and strength with the MGA channel, we simply tried to capitalize on that with respect to the segregated funds,” Mr. Herr says.

To boost product promotion in 2005, the insurer developed a dedicated regional wholesalers team, similar to those that have existed for a long while in the mutual fund world, he added.

At Standard Life, segregated funds’ solid returns have been singled out as the spark that ignited net sales, said Jean-Stéphane Parent, manager of investment product development and management.

“Our Canadian equity fund and balanced fund, which had posted adequate returns for years, achieved a solid performance in 2005. Before, there was a lot of unit redemptions, but revitalized returns have triggered a turnaround,” Mr, Parent explained.

“Mutual funds performed well in recent years and sales followed. It was just a matter of time before we saw this trend reflected in segregated funds,” Mr. Parent added.

The restructuring of Standard Life in September also generated positive effects, he says. “Our two sales teams were blended into one, which led to an increased emphasis on the promotion of our segregated funds,” he explained.