With baby boomers perched on the brink of retirement, it has never been more important to sell mutual funds, say executives of firms surveyed in this year’s Insurance Advisors’ Report Card. However, this strong sales push — with little emphasis on comprehensive financial planning — is making some advisors feel pressured.
“The people at the top are emphasizing the wealth-services aspect of the business, when clients really need more support on the life side,” says a Hub Financial Inc. advisor on the West Coast.
“The worst aspect of this company is its emphasis on mutual funds,” chimes in a Freedom 55 Financial advisor from the Maritimes. And with 97% of Freedom 55 advisors surveyed holding a mutual fund licence, the significance of selling mutual funds is clear.
“Mutual funds are very important to an advisor’s revenue stream,” says Nick Pszeniczny, senior vice president of London, Ont.-based Freedom 55. “It’s also important to us at the corporate level.”
All of Freedom 55’s advisors must obtain a mutual fund licence, although only 23% of those surveyed also hold the certified financial planner designation and 13% hold the chartered life underwriter designation. Still, advisors say the firm is doing something right when it comes to support for financial planning, rating their firm tops in the category with a score of 8.2.
Mutual funds are also a crucial component of Clarica Financial Services Inc.‘s bottom line — 97% of Clarica advisors surveyed are licensed, while 47% hold CFPs and 13% hold CLUs. “As a result of demographics and advisor preference, the move from insurance to financial planning has long been underway,” says Jack Garramone, vice president of Waterloo, Ont.-based Clarica’s sales force.
Accordingly, the company’s support for financial planning is strong; reps gave Clarica a second-place score of 8.1 in this category. But one advisor on the Prairies gripes that there’s not enough incentive to sell funds: “We’re the lowest-paid mutual fund provider out there.”
Aurora, Ont.-based State Farm Insurance Cos. boasts the third-highest number of mutual fund-licensed advisors, with 87% of those surveyed holding a licence — more than three times the number holding a CFP designation (27%). It offers no support for financial planning.
But the wealth-management business is only one aspect of the company, stresses Pete Karageorgos, public affairs supervisor: “We’re an insurer, first and foremost.”
The majority of Vaughan, Ont.-based World Financial Group Inc.‘s advisors are also mutual fund-licensed, with 76% of those surveyed able to sell funds. Advisors aren’t required to hold the licence, but company president Richard Williams stresses its importance in properly serving clients. Williams is also blunt about one of the firm’s motivations for selling funds: “Our model as an organization is helping families. But you have to make money in this business — or you wouldn’t be in it.”
WFG offers no financial planning support, but advisors have the option of purchasing financial planning software. “We encourage our sales force to do a full financial plan, but it’s really up to the individual,” says Williams. Only 3% of the advisors surveyed hold CFPs.
At Woodbridge, Ont.-based Hub, 73% of advisors surveyed are mutual fund-licensed, while 40% hold a CFP and 17% hold a CLU. “Advisors aren’t required to have an MFDA licence, and they may actually be licensed through other [mutual fund dealers],” says John Lutrin, Hub’s Vancouver-based chief marketing officer and executive vice president. This isn’t to say Hub isn’t encouraging its stable of 3,000 life insurance advisors to obtain their mutual fund licence: “Our objective is, gradually, through our relationship on the life side, to tell advisors to consider moving their mutual fund licence to us.”
The firm also offers financial planning support, which Hub advisors gave a last-place grade of 5.8.
Most Equinox Financial Group Inc. advisors — 72% of those surveyed — are mutual fund-licensed. The firm — which is soon to be shut down — is also home to the most CFPs, with 52% of those surveyed holding the designation; as well, 24% hold a CLU. Advisors say Equinox is average when it comes to support for financial planning, giving their firm a grade of 7.4 — 0.1 points below the category average.
Although Equinox doesn’t offer mutual funds, at least one advisor says this is the way it should be. “We have complete product objectivity,” says the British Columbia-based rep. “I don’t know how any CFP can comply with the standards of practice at most other companies.”
@page_break@Advisors at Great-West Life Assurance Co. are less likely than most of their industry peers to be mutual fund-licensed, with only 52% of those surveyed holding a licence. There also appears to be less emphasis on financial planning, with only 26% of advisors surveyed holding a CFP designation. “It’s more focused on products and sales — that’s never going to change,” says a Great-West Life advisor in the Maritimes.
But Leander Dueck, senior vice president of individual distribution for the Winnipeg-based firm, begs to differ: “We are constantly growing our support resources for financial planning, at a rate of about 20% per year. Significant support is there.” Nevertheless, advisors gave their firm a mediocre grade of 7.3 for financial planning support.
Although opinions are mixed on Great-West Life’s commitment to financial planning, there’s no disputing the importance placed on selling funds. “I don’t believe any firm in today’s marketplace can be profitable with just one distribution model,” says Dueck. “We really believe that to be a successful advisor, you need to be mutual fund-licensed.” And selling funds will become even more critical to an advisor’s revenue stream going forward, as baby boomers transfer wealth to the next generation, he adds.
The Co-operators Group Ltd. is also hoping to take advantage of the imminent wealth-transfer boom through mutual fund sales. “We strongly encourage our advisors to be mutual fund-licensed,” says Jim Wingrove, director of agency and sales support for the Guelph, Ont.-based firm. “As our demographic ages, mutual funds can help clients reach their retirement goals.”
Only 30% of Co-operators agents surveyed hold a mutual fund licence, with 23% holding a CFP. However, reps gave the firm a solid score of 8.1 for financial planning support.
“As we bring on new advisors, we are strongly encouraging them to be licensed,” says Wingrove. Until then, one Co-operators agent notes, the firm has a healthy segregated funds business. “The reason Co-operators sells seg funds is because the majority of its agents aren’t mutual fund-licensed,” says the Western advisor.
Most PPI Financial Group advisors also aren’t fund-licensed: only 38% of those surveyed hold the licence, while 34% hold a CFP and 55% hold a CLU. However, because the firm has no plans to offer mutual funds, these low numbers are of no concern to PPI chairman and CEO Jim Burton: “We did [offer mutual funds] in the past, but it was hard to create a real value proposition.” IE