Guaranteed interest funds (GIF) and high interest savings account (HISA) are currently two extremely attractive savings solutions for your clients. Philippe Guillemette, financial planner from the Large Case Solutions team, explains why.
1. Philippe, how can we present GIFs and HISA to our clients? What are their similarities and differences?
“We can start by explaining that guaranteed interest funds (GIF) and the high interest savings account (HISA) are risk-free investment options, since the capital is guaranteed. Also, their returns are extremely attractive right now.
The main difference between the two is that GIFs are term contracts, meaning clients choose a fixed duration for their investment. This could be, for example, 12 months. The return is therefore known in advance and guaranteed for the duration of the investment. On the other hand, the return of a HISA will depend on interest rates.
Both options are relatively liquid (that is, they allow one to access cash), which can be beneficial for short-term plans. A HISA is even more interesting in this respect, since the funds can be withdrawn at any time and without fees.
Unlike other guaranteed investment options, such as some GICs from banks, GIFs can also be redeemed at any time, but there is a redemption fee for withdrawals made before maturity. So, it’s best to keep the money invested for the entire term.”
2. Why are they currently considered to be good investments?
“Rising interest rates make GIFs and HISA more profitable. These investments integrate well into a portfolio to lower risk and guarantee returns, which can help your clients achieve their financial goals.”
3. Can they also be advantageous in the context of stock market uncertainty?
“Yes, definitely! Faced with the market uncertainty that we are currently experiencing, the guaranteed returns offered by GIFs and HISA represent a reliable option for many. They’re safe havens not only for those who would prefer not to take any risks, but also for those who would simply prefer to wait and see what happens in the coming months and invest when they’re ready.
In addition to being an excellent shelter, a HISA is ideal for building an emergency fund. The sum the client invests in a HISA is preserved for financial contingencies. It also generates returns that are much more attractive than those your clients would receive if they were to let those same savings sit in a regular bank account.”
4. In your opinion, are there other scenarios where a GIF or HISA could be beneficial?
“Yes, there are many. They can, for example, be beneficial for someone who would invest in them within an RRSP or a TFSA, since the gains would then become exempt from taxes.
GIFs can also be used for medium-term saving. If a client is planning a major project, such as purchasing a home or taking a vacation, they will know the exact amount of earnings their investment will provide and, in that way, will be able to better plan their expenses.
HISAs can also be an excellent way to leverage excess cash in a company’s coffers. Since it remains accessible, this money can even be used for business operations.
These are just three examples, but there are, of course, many more. It’s up to the advisor to determine how to best implement these tools with their clients.”
5. Do GIFs and HISAs have other advantages for business owners?
“Yes. Both products come with the benefits of segregated funds, including protection against creditors. If a company were to face bankruptcy or be the target of a lawsuit, the sum held in a GIF or a HISA would be unseizable. In the current context, this advantage could be a reassuring feature for business owners. Make sure you are aware of the conditions and laws that apply to your client's situation.
But whether your clients are employees or business owners, we must remember that what’s most important is that their assets be diversified. Advisors are in the best position to determine the most effective ways to integrate GIFs and HISAs to create a balanced portfolio.”
