Questions re: 100/100 GIF/Segregated Fund - BMO Insurance

xgbsSS wrote: ↑ I think you are reading the wrong document. 75% would be if you bought a 75/75, 75/100 contract or you renewed the policy. The only time 75% would apply to a 100/100 is if you renew the policy under certain circumstances.

1) In the BMO contract, you would be given 100% guarantee of the initial investment amounts upon death or maturity on Dec 31, of the 15th year of the policy.

2)(?) I'm not sure what you are getting at here. You can renew the contract, when you renew the contract, the gains are locked into as a new guaranteed amount.

And yes you would only get whatever the market value of your investment is if you cash out before minus penalties for breaking the contract.

https://www.bmo.com/advisor/PDFs/bmo-gi ... e-616e.pdf

choicedot3 wrote: ↑ 1. I was looking at the following current BMO doc: https://www.bmo.com/advisor/PDFs/bmo-gi ... e-595e.pdf

On this doc, it says: https://imgur.com/YVxl3zD

There is also illustration based on 25 years maturity: https://imgur.com/Y57mK08

That said, based on this doc, the 100% guarantee applies to all deposits (not just initial deposit) made up to 10 years before the maturity date, and then it will automatically change to 75%.

At this point, you may be wondering, if this is what the BMO document is saying, why would I still need to ask, right? BMO doc should be the source of truth, right?

The reason why I'm still asking here is that what I explained on my posting, my investment broker was asking the person at BMO who is responsible for segregated fund and this BMO guy said, the 100% guarantee is throughout the 15 years maturity (not up to 10 years before) which is in contradiction with what those BMO doc is showing and wondering if anyone here looking at the same thing like I do.

My BMO GIF is 15 years maturity, therefore I was thinking that the 100% guarantee applies to all 15 years, but based on the above doc, the 100% guarantee is only for the first 5 years, the remaining 10 years will be under 75% guarantee.

FYI: BMO GIF is not just for initial single deposit. I can make multiple deposits anytime I want.

2. With BMO GIF, I can withdraw anytime I want and at any amount I want as well. No penalty. The only thing that I have to pay is the surrender fee, 4% 1st year, 2.5% 2nd year, free after 3 years.

That said, let's say I made a $15K deposit, and then 4 years later market value is $17K. At the same time, I want to withdraw all the funds in it: would I get $17K or $15K? This is what I'm getting at with my second question on my posting.

I can only assume, there won't be any guarantee if I withdraw before the maturity date. Guarantee only applicable on/at the maturity date.

xgbsSS wrote: ↑ Firstly, I would use the full document I provided you. And please confirm your contract as you may have signed something different from other BMO GIF policies.

You are correct. It becomes 75% because the contract matures, but remember the guarantee amount resets based on the increases of the product and only on the renewal deposit. So theoretically with market gains, the guarantee should increase.
But you are not correct that it is only for the first 5 years. The fund document clearly says the guarantee amount is for the contract period. The guarantee on 100% applies to all deposits made at least 15 years prior to the maturity and subsequent maturities with all deposits less than that being 75%.

Generally these products provide limited guarantees for the cost. I am generally not a fan of them.

choicedot3 wrote: ↑ Can you explain what do you mean by these products provide limited guarantees for the cost? Thx!

xgbsSS wrote: ↑ How much are you really protecting on investments if all you get is what you have deposited? You are paying 2.5-3% per year on these funds. There are better ways to protect your investments than GIF.

Are you investing via a corporation? Do you mind if I ask how much you make in a year? Do you have a corporation? Are you dealing with specific estate issues?

Since you already are investing via a universal life policy, the GIF funds, are they really necessary? If you have a corporation you need to collapse or specific business holdings, these may be appropriate.

choicedot3 wrote: ↑
What do you mean by all I get is what I have deposited? Are you saying, with the return minus the fees, in the end, I'm back to what I have deposited? Based on the following: https://www.bmo.com/advisor/canada/inte ... s-773e.pdf total fees are around 1%

Simplified fund performance list: http://factsheets.lipperweb.com/digital ... t%20EN.PDF

My funds:

Global Balance GIF 100/100 CLA-DS - 5421
US Balance Growth GIF100/100 CLA-DS - 121
Balance ETF Portfolio GIF100/100 CLA-DS - 5121
Monthly Income Inc GIF100/100 CLA-DS - 5221

I do not have a corporation. I'm an employee with around $75K income and a total family income of around $150K. My wife (also an employee) also has the same thing as me.

I don't have specific estate issues, not even sure what that is. Just like my decision with tax-exempt investment through life insurance, I had a simple mind when I decided to open 100/100 GIF, it will be good for us if in addition to tax-exempt investment from insurance, we can get another TFSA (our 100/100 GIF is under TFSA) and at the same time is 100% guarantee.

There is more to learn for me and I'm more than willing to hear what you have to say. Much thanks!!

xgbsSS wrote: ↑ Um no, you are paying in excess of 3% a year in management expenses on these funds. The 1~1.50% is in addition to the underlying fund's fees. This is why segregated funds especially with your age and income level are definitely a rip off. I would immediately transfer out here. The insurance you are paying on GIFs means you are guaranteed to get what you have deposited back. But if investments in general go up in value, why do you pay insurance for this? Unless we have a very long recession, the likelihood of this is very low, but you are guaranteeing underperformance on your investments.

This and your universal life insurance means you are over insured for no reason. Your income level and lack of estate issues (you don't own a corporation or multiple properties, etc.) means you are over-insured for no reason that I can see. Can I ask if you have debt issues where you are concerned about repayment? Do you and your wife have a defined pension plan at work?

For example
Global BalanceDGIF 100/100 you are paying 3.31% MER
U.S. Balanced Growth GIF 100/100, you are paying 3.03% MER
Balanced ETF GIF 3.02%
Monthly Income 3.23%

I am only going to take one example Let's take BMO Balanced ETF Fund Series A (the underlying fund) vs the BMO Balanced ETF GIF 100/100 that you own. On $10000 in 5 years.



You have lost about $800 on $10000 in 5 years on this insurance.

The insurance you are paying for only guarantees that you have at least what you deposited. But if you are looking at long term growth, you really are paying for insurance you are unlikely to benefit from. This, with your age and the lack of need for segregated funds means you are being ripped off by the looks of it. You are not what I would consider a candidate for GIFs/Segregated funds. You need to transfer out and break this. You already own a universal life insurance policy (based on your other post) which means you are already covered upon death.

choicedot3 wrote: ↑
BMO GIF 100/100 comes with automatic maturity guarantee monthly reset to match the market value.

Does that mean deposit + gains? If so, the 100% guarantee not only for the deposit but also the gains, right? If not, then, what's the purpose of automatic monthly reset?

We dont have debt issues and my wife's employer provide 6% RRSP matching while my employer provide 1% RPP contribution.

xgbsSS wrote: ↑ Yes, BMO's product resets, but as you saw in the documents, only 75% of the maturity value on renewed contract. So then what's the point? Additionally, the likelihood of benefiting from this product is extremely low. You are paying out the nose for insurance you barely benefit from.

Are these TFSA investments? What type of account are you purchasing the GIFs in?

choicedot3 wrote: ↑ Does 75% deposit + gains still not make this product worth it?

For me, the reason why it's 75% is because I chose 15 years maturity. The 100% only applies to deposit made at least 15 years from maturity.

So for me, only the 1st deposit was considered to be made at least 15 years from maturity. Any subsequent deposit will be 75%.

But for those who chose up to 25 years maturity, all the deposits + gains from year 1 - 10 are 100% guaranteed.

Yes, this is TFSA.

xgbsSS wrote: ↑ I want you to compare the growth of investments on an equivalent fund. Look on the Segregated fund page I posted above. you are potentially losing on thousands of dollars of growth in the longer term for insurance you likely won't benefit from. The guarantee value is likely going to be nil in any benefit because investments in general do go up overtime. If you are intending to have this money for your retirement, the likelihood of you being below the investment value is almost zero. Instead, you are guaranteeing underperformance because you are paying in excess of 3% of fees. Unless you are 80 years old (because you might die suddenly and the investment happened to drop), the likelihood is low. The reason why I asked if you had debt issues is because there is some creditor protection with this product.

Because you are not in the situation I have stated, you are losing by staying with the GIF. Transfer out immediately.

choicedot3 wrote: ↑ I see, that's what you meant by the cost of having this type of GIF that I am losing the opportunity to gain higher return if I invest somewhere else.

Any suggestion where else to have a better TFSA investment?

xgbsSS wrote: ↑ If you wanted to stay with BMO, pretty much any BMO mutual fund, or mutual fund at your bank. Did you know you can buy almost all the same GIF funds without the insurance at BMO? Because all it is, it is the same mutual fund, but without the extra insurance tacked on.

Better yet, you can do your own ETFs, and save significantly. You can even buy BMO ETFs as BMO is a big provider of ETFs in Canada. We can certainly guide you from here. This forum is mostly DIY investors. There are many affordable options out there with much better growth potential overtime.

One thing I will caution you. There will be a penalty to leave your GIF funds as you will break your contract. As much as this will hurt, in the longer term, this is better off. You can then focus on growing your funds at a lower cost. If you are keeping your Universal Life insurance, you are more or less protected by the $330k face value policy so in the event of death, you are covered.

choicedot3 wrote: ↑ I was asking my agent, is there any fees if I cashing out my GIF and he said, 4% for the first year, 2.5% for 2nd year, after 3 years, it will be free. So, based on his explanation, there is no such thing as penalty?

xgbsSS wrote: ↑ That is precisely the penalty. That is the deferred sales charge.

Don't sell directly with the broker. I would first set your account wherever you plan to invest, then initiate a transfer into the new account from the GIF plan. Get the new bank/investment firm to initiate the transfer for you. It will be much easier and you won't have to worry about withdrawing and the limit.

choicedot3 wrote: ↑ OK, so to avoid paying the penalty, I need to wait for 3 years.