Looking for growth in a low-growth insurance environment, a number of Canadian insurers are building out their wealth-management platforms — by adding mutual fund manufacturing, distribution or both.

“We’ve seen a blurring of wealth management,” maintains David Scandiffio, president of IA Clarington Investments, a subsidiary of Quebec City-based Industrial Alliance Insurance and Financial Services Inc. In the past four years, the life and health insurer has consolidated three fund manufacturers under the IA Clarington brand and acquired two mutual fund dealers.

Industrial Alliance is not alone. Montreal-based Desjardins Securité Financier has followed a similar path, most recently acquiring mutual fund dealer Performa Financial Group Ltd. in early 2006. Around the same time, Toronto-based Hartford Investments Canada Corp. added a fund manufacturer. And over the past few years, Winnipeg-based Great-West Life Assurance Co. has added both mutual fund manufacturing and distribution, through subsidiary London Life Insurance Co. , as has Toronto-based Transamerica Life Canada.

Client demand and financial services industry integration are key factors in this shift, says Scandiffio. Banks have become a dominant force in offering wealth-management products and services; for competitive reasons, insurance companies likewise want to be able to offer a wealth-management product lineup to advi-sors and their clients.

“It is far easier to sell a second product to a client who has already done business with your firm,” says Steve Cole, vice president of sales and marketing in Toronto for the recently rebranded Desjardin Financial Security Independent Network, through which DSF distributes insurance products. (Desjardins Financial Security Investments Inc. is its mutual fund dealer.)

If the investment needs of its advisors’ clients are not met, says Cole, “We may not have the opportunity to assist in meeting their insurance needs.”

Rich Rausch, president and CEO of Great-West’s Quadrus In-vestment Services Ltd. in London, Ont., expresses a similar sentiment: “Mutual funds are an important investment option, and we want to be in a position to be able to provide our clients and their advisors with comprehensive choices for all their financial planning needs.”

And there is no doubt that wealth management is where the opportunities for growth are. “Insurance doesn’t have the growth rate on its own compared with the wealth-management side, which is an area that has grown in the double digits,” Scandiffio adds.

Industrial Alliance — which has been around since 1892 — first entered the fund business in 2003, when it acquired Co-operators Life Insurance Co.’s mutual fund line. In 2004, it added Laurentian Bank of Canada’s fund operation and acquired Clarington Funds in 2005. It now has $6 billion in assets under management under the IA Clarington banner. The IA group of companies also includes two mutual fund dealers: Markham, Ont.-based FundEx Investments Inc. (91.75%), which acquired FundTrade in 2006; and Investia Financial Services Inc.

While DSF has been selling proprietary mutual funds for more than 20 years, it moved into offering a broad array of funds in the 1990s and boosted its fund distribution efforts in 2006. “It may seem a little contradictory,” says Cole, “but we believe that to show the value in our product mix, we have to offer our independent financial advisors the opportunity to compare and sell the products of many manufacturers.

“We believe that our advisors respect the extent of our product mix and are, therefore, willing to evaluate DSF’s product line on an equal footing with that of our competitors,” he adds.

DSF’s strategy of diversifying to include wealth-management products is working well, says Cole. So well, in fact, that his firm has seen “a marked increase” in clients who purchase insurance products from DSF after buying mutual funds through DSF advisors.

It is much the same story at Quadrus, says Rausch: “We’re seeing tremendous growth in our mutual fund family because of innovations such as our corporate-class funds, our dealer wrap program and our charitable-giving program.”

When Transamerica launched its mutual fund family in June 2002, AEGON Fund Management Inc. was “a natural extension” of Transamerica’s wealth-management products such as segregated funds, annuities and UL policies, says Geraldo Ferreira, vice president of investment products.

As with DSF and Great-West, AEGON enabled Transamerica to provide more to its distribution network, Money Concepts Inc. and AEGON Dealer Services Inc. “The advisors were looking to get licensed and offer mutual fund products to their clients,” adds Ferreira.

@page_break@Broadening into mutual funds has allowed Transamerica to offer mutual fund versions of segregated funds managed by AEGON Capital, he says, noting that Morningstar Canada recently cited Transamerica “as having the most five-star seg funds.” Three of those funds are available through AEGON Capital: imaxx Canadian Bond, imaxx Canadian Balanced and imaxx Canadian Small Cap.

Unlike other insurers whose mutual fund offerings grew out of their segregated fund offering, Hartford Canada, a subsidiary of U.S. giant Hartford Financial Services Group, focuses solely on mutual funds in Canada. Its Canadian insurance operations are small — “Not like the big insurance companies,” says Mary Taylor, senior vice president of marketing and products at Hartford Canada, which got started in Canada in 2000 at the behest of Edward Jones. In the U.S., Taylor says, the two companies have a long history.

Hartford Financial’s entry into Canada is part of an overall global strategy to develop its wealth-management side. IE