Advisors pay more attention to succession planning

“Our advisors have a relationship with the company in which, at any given time, should they want to, they can leave and they will receive a value for their businesses,” says Jack Garramone, vice president of Sun Life’s career sales force.

The CORe program has advi-sors taking notice, and many praise its benefits. “The agent is guaranteed 10 years of annuities,” says a Sun Life advisor in Nova Scotia, who, along with many colleagues, named the program Sun Life’s best aspect.

The secret to offering advisors compensation up to 10 years after they leave Sun Life is the firm’s “level” commission structure. Rather than receive outsized first-year commissions and dwindling returns in following years, Sun Life agents receive level commissions for the life of the policies they have sold. Garramone says this structure is designed to encourage lifetime relationships with clients because the longer the relationship is sustained, the greater the commission payout.

Once an advisor is ready to retire, the value of his or her business is determined by total amount of commissions payable at that specific time. These commissions are then paid to the advisor every year for 10 years.

Alternatively, Sun Life’s business organization team, which is composed of business-development managers across the country, aids senior advisors in structuring their businesses to bring in new agents to buy their books. The value of the business is again determined by the level commission structure.

Winnipeg-based Great-West Life Assurance Co., which ranked second in the succession support category, has a similar approach to Sun Life. Its level commission structure plays a key role in adding value to advisors’ businesses, GWL says, making those businesses attractive to potential successors.

GWL also has regional directors dedicated to helping agents prepare their books for a successor, with professionally delivered resources and monthly seminars. What separates GWL’s succession program from Sun Life’s, however, is its financing relationship with National Bank of Canada.

“We help the bank with evaluating the business and give it our expertise,” says Leander Dueck, GWL’s senior vice president of individual distribution. “[National Bank] provides the financing [for advisors who want to buy books].”

Although Sun Life and GWL won kudos for their structured succession programs, the two firms with the lowest scores in the category drew the ire of their advisors because they didn’t have any such program in place.

In fact, agents with Guelph, Ont.-based Co-operators Group Ltd. say their firm is much more reactive than proactive when it comes to succession planning.

“It doesn’t plan. It waits until someone leaves and then figures it out,” says a Co-operators agent in Ontario. “It should plan ahead.” Once a senior advisor is ready to leave, he adds, the insurer will buy back his or her book.

Advisors at London, Ont.-based Freedom 55 Financial also gave their firm’s succession program negative reviews, a result most agents blame on the firm’s lack of direction in this area.

“It’s purely voluntary,” says a Freedom 55 advisor in Newfound-land and Labrador, “There is nothing in place that ensures clients will get the best possible service through [the] transition.”

A Freedom 55 advisor in Alberta adds: “It doesn’t pursue it, and doesn’t send us any information. It’s not in a written agreement; it’s a verbal agreement only.”

Although Freedom 55 advisors may say that not directing more corporate resources toward succession planning is a mistake, Mike Cunneen, senior vice president of the company’s wealth and estate planning group, says a non-standardized route for succession planning fosters flexibility.

“Advisors have many different choices and options,” he says. “It’s not just about retirement. It could be about a segment of their clients, or how to add staff. The focus could be the markets that they choose. What we really try to do is provide a lifetime service to our clients. So, the advisors have the right information to make informed decisions about their respective practices.”

@page_break@None of the four managing general agencies surveyed have full-fledged succession programs; nevertheless, they do provide support to their advisors in the form of seminars and help connect the retiring advisors with interested successors.

One advisor in Quebec with Toronto-based PPI Financial Group Inc. calls the MGA’s succession support: “The best facilitated succession plan I’ve seen.”

And a PPI advisor in Ontario says the firm is focusing on training younger agents.

But despite these strong services, PPI chairman and CEO Jim Burton says PPI is not done yet: “We’re in the midst of establishing a fund of several million dollars that will help advisors find the right party and finance the transaction with the appropriate evaluation.”

Mississauga, Ont.-based IDC Financial Inc. is working on developing support for succession planning similar to PPI’s. “We are looking at some way that we can develop something for our advisors as an opportunity,” says IDC president Ron Madzia. “So, if they want to leave the industry, we can hook them up with the right advisor and the right formula to enable them to transfer that business so that it’s a win/win for both people.”

Toronto-based World Financial Group Inc. hasn’t experienced much demand for succession planning support, says president Richard Williams, but the MGA does try to make the process of transferring a book either internally or to a spouse as easy as possible.

And advisors at Woodbridge, Ont.-based Hub Financial Inc. say that they’re in good hands. Says a Hub advisor in British Columbia: “[Hub] has really stepped up to the plate on providing resources for succession planning.” IE