Need to Raise the Bar in Segregated Fund Statements! – Dalbar

Wednesday, 02 September 2009 – Throughout this study, DALBAR found that overall, segregated fund providers have made improvements to their statements. However, they are still failing in many cases to display personal rates of return, account fees, guarantee amounts, reset options and death benefit guarantee amounts.

DALBAR examined 9 segregated fund industry statements from the investor point of view.

The top statements were able to provide not only the most basic account information and transaction history, but also plan details such as guarantee information and adjusted cost base (ACB) figures. Top statements also promoted the firm’s websites, directing investors on how to access documents such as fund performances online. Due to the complexities of the segregated fund
product, investors may not fully understand all the details on the statement,
and many firms were able to provide the appropriate contact information for those questions to be answered.

The 2007 rankings are significantly different then the current results for 2009. In 2007, the following industry trends were observed:

  • Segregated fund providers are doing a poor job of informing investors of the details of their segregated fund features: deposit maturity dates, guarantee amounts, reset options, death benefit guarantee amounts.
  • Another shortfall observed in the industry was found in providing investors with personalized rates of return.
  • Comparing performance to an appropriate benchmark was a third area of oversight.

The top ranked Segregated Fund statements for 2007 were:

Ranking Insurance Company

  • # 1 Manulife Financial
  • # 2 London Life
  • # 3 Sun Life Financial
  • # 4 Clarica
  • # 5 Great West Life

The top ranked Segregated Fund statements for 2009 are:

Ranking Insurance Company

  • # 1 Sun Life Financial
  • # 2 Manulife
  • # 3 London Life
  • # 4 Standard Life
  • # 5 Great West Life

There remains much room for improvement, across the entire industry. The most notable omission in several statements is the personal rate of return, as well as statistical returns given over several time periods (1 year, 3 year, 5 year, 10 year returns), and benchmarks. Another missing area is fees that are not clearly specified in the statements. Finally, all firms would benefit from providing more targeted messages to the investor, that are specific to their investor profile, demographic, and investment portfolio.

DALBAR, Incorporated

North America’s leading financial-services research firm is committed to raising the standards of excellence in the financial services industry. With offices in the US, Canada and the U.K., DALBAR develops standards for, and provides research, ratings and rankings of intangible factors to the mutual fund, broker/dealer, discount brokerage, healthcare, life insurance and banking industries. They include investor behaviour, Internet services, customer satisfaction, service quality, communications and ratings of financial and healthcare professionals.