lmost 85% of the 200 insurance advisors surveyed in Investment Executive’s Insurance Advisor’s Report Card hold licences to sell something other than life insurance. And eight of 10 members of the Canadian Association of Insurance and Financial Advisors are licensed to sell both life insurance and mutual funds, and 7% have completed a securities course. Multiple licences have become the reality.
But John Whaley, executive director of the Independent Financial Brokers of Canada, believes the cross-licensing craze may be waning. “A year ago, I would have said the trend would continue. But now I’m not so sure,” he says, citing the weakness of stock markets. There is no longer the pressure to be in the market, either for the clients or for the money.
Jim Rogers, chairman of The Rogers Group Financial Advisors Ltd. in Vancouver, agrees that “the rate of growth was assisted by the shape of the market throughout the ’90s.” But, he also believes, multiple licences are here to stay. The highly specialized agent will remain in the minority, he says. Traditionally, it was a life insurance payout that replaced the income of a primary breadwinner in case of tragedy, but now the population is maturing differently. To reach the broadest client base — the 30- to 50-year-old age group — an insurance advisor must upgrade his or her designations and ultimately expand his or her sales repertoire because the “typical” client population isn’t there any more.
The insurance industry has recognized this. It is undergoing a major licensing and educational overhaul. On June 1, it saw the introduction of a new single-step nationwide licensing system, the Life Licence Qualification Program. Slated to become mandatory as of January 2003, the new program is a tougher regime, and most insurance advisors say it is about time industry standards were raised.
The LLQP will be the entry-level proficiency standard for new life agents. It is also a one-step licensing system, as opposed to the current two-level licence.
“The new program was designed from the perspective of the knowledge and skills required of insurance agents in today’s environment,” says Grant Swanson, chairman of the committee to co-ordinate implementation of the LLQP and director of licensing and compliance at the Financial Services Commission of Ontario.
“It’s not theoretical academic training. This is very much a skills-based program. Individuals who complete the LLQP will be able to satisfy a wider range of client needs and, because of the training, they should be more successful than in the past,” he says.
Many insurers have been demanding a new standard. Clarica Life Insurance Co., for instance, supported the idea long before the LLQP was initiated by the provincial insurance regulators, says Alastair Rickard, Clarica’s financial planning services vice president in Waterloo, Ont.
“We believe higher standards for entry to licensing as a life insurance agent is a desirable objective,” he says. “Existing agents aren’t going to have to worry about it, but I would think that they are supporting it.”
At the advisor level, the future of cross-licensing is unclear. Although most insurance advisors are licenced to sell more than life insurance, at the same time advisors rated the importance of product integration low — only 5.0 overall on a scale of zero to 10. That may explain some of the mixed feelings about the subject. “It’s a pain in the ass,” says a Clarica agent in Alberta.
Some insurance advisors see the step away from specialization as them becoming jacks of all trades, and fear they will be masters of none. “The impact is more from the company doing it rather than a need from the clients for it,” says one State Farm Insurance Cos. agent in Ontario. “I don’t hear my clients asking for it. It’s something banks and big companies have cooked up.”
Swanson see cross-licensing as a step closer to one-stop shopping thanks to strategic alliances. “Holding multiple licences represents opportunities for commission- sharing in an office, not necessarily selling,” he says.
Not all agents see financial cross-licensing and geographic cross-licensing in the same light. Few agents would hesitate to cross borders if it meant retaining clients: 20.4% of the advisors surveyed hold licences in more than one province.
If a client moves to another province, the agent must hold a licence in that province to be able to keep that client on the book for future sales. Differing licensing standards and requirements among provinces have been contentious issues. Ontario, Manitoba, Saskatchewan, Alberta and British Columbia have a two-tiered system, while Newfoundland has three tiers and the Atlantic provinces have none. The new Life Licence Qualification Program emulates the Quebec licensing system and will eliminate the need to write exams whenever a client gets transferred.
Swanson says the LLQP became available as an optional equivalency in every province but Quebec, which already has an enhanced education program, and New Brunswick, which is waiting until the courses become available in French. Advisors who want to obtain a life insurance licence have the choice of completing either the new LLQP course and examination or the existing Level 1 and Level 2 examinations. The new regime will begin in January, except in B.C., where the date is tentatively set for September 2002.
The new curriculum covers life insurance products, disability, accident and sickness products, insurance-related investments, consumer needs analysis and risk management. The course will be offered by CAIFA, the Canadian Securities Institute, Foran Financial Institute, the Investment Funds Institute of Canada (in a joint project with the Peel Institute of Applied Finance), the Insurance Institute of Canada, Seneca College, London Life Insurance Co., Clarica and Primerica Financial Services Ltd.
Grandfathering arrangements will be made for advisors who are already fully licensed.
State Farm’s sales force has felt the impact of product integration more than any firm surveyed. State Farm advisors rated its impact at 7.0, a full point higher than any other force and two higher than the survey’s average.
Their agents have seen a lot of it. Life insurance is relatively new and makes up a small part of the firm’s property and casualty sales, its principal business. Mutual funds, which State Farm has been selling for only 18 months, “were products we needed to better serve our client base,” says the firm’s media relations specialist, Derek Fee. He says 70% of its agents are licensed for mutual funds, now have $25.5 million in assets under management and don’t see sluggish markets as a reason to back off. “Last year was not a positive year for anyone,” Fee says.
Meanwhile, as insurance companies and agents are trying to step outside the industry, others are heading into their territory. With the advent of the LLQP, says Dave Traynor, CAIFA’s vice president of programs, “There is a huge uptake in the number of mutual fund and securities people applying to get their Level I [insurance licence].” IE