Insurance advisors work hard to build their businesses and expect a payoff for the time they have spent in cultivating strong, fruitful client relationships. However, many advisors surveyed for this year’s Insurance Advisors’ Report Card said they are struggling to set up the transfer of their books of business without ample succession planning support from their firms.
The results of this year’s Report Card reveal that succession planning has become much more important to advisors. The overall average importance rating for the “firm’s/MGA’s succession/retirement program for advisors” category rose significantly to 9.0 from 7.8 year-over-year.
Advisors place a high value on succession planning because they want to be rewarded for their time and commitment, says an advisor in Ontario with London, Ont.-based Freedom 55 Financial: “We work really hard for our businesses. We’ve built relationships with our clients and we want to leave them in good hands. It’s a big deal to advisors.”
But, despite the strong demand for this support, fewer than half of all advisors surveyed – 48% – have a documented succession plan. This may be due to the fact that advisors feel the support they need from their firms is not there, which is reflected in the “satisfaction gap” – the difference between the overall average importance and performance ratings – with the latter declining to 8.0 from 8.2 in 2013. The reason for this increasing gap is that many firms aren’t stepping up as quickly as advisors would like – especially in bringing in younger advisors who will be able to take over.
“[The firm] wants to help, but I don’t think they know how,” says an advisor in Ontario with Winnipeg-based Great-West Life Assurance Co. “Help in hiring advisors is important because we’re producers, not trainers. I wouldn’t want [the firm] to be 100% involved, though, because you lose independence.”
Many advisors identified succession planning as an issue in the insurance industry because of the divide between junior and senior advisors.
“There are a lot of aging advisors who don’t have relationships with younger advisors,” says a Freedom 55 advisor on the Prairies, “and then younger advisors can’t afford to buy the business.”
Advisors also lamented both the lack of mentorship support for younger advisors who join the business and that it’s difficult for firms to retain new advisors.
“The business is really hard, particularly cold calling,” says an advisor in Ontario with Waterloo, Ont.-based Sun Life Financial (Canada) Inc. “[The firm] expects you to build your business from the bottom up. If I were looking to join now, I don’t know if I would.”
As a result of all this, many aging advisors are feeling the crunch in that they aren’t finding enough suitable junior candidates to take over their businesses.
“I haven’t found anyone to take over,” says an advisor in British Columbia with Woodbridge, Ont.-based managing general agency Hub Financial Inc. “I’ve been looking a long time and asked my firm for help ages ago.”
Adds a Freedom 55 advisor in Atlantic Canada: “[The firm] leaves it up to advisors to negotiate [transferring a book of business]. If they don’t find someone, [the book] doesn’t get sold.”
Mike Cunneen, senior vice president of Freedom 55’s wealth and estate planning group, says helping to identify successors for senior advisors has been a major initiative for the firm this past year: “Rather than calling it ‘match-making,’ we would facilitate the discussion and test to ensure that people hold the same kind of expectations and core values, so that when they go into this partnership, it’s well thought-out and the plan is successful. At the end of the day, what we want is a smooth transition for clients.”
Sun Life appears to be delivering what its advisors want in terms of the support the firm offers for putting together a succession plan. The firm’s advisors were incredibly pleased with the services offered in this area, rating their firm at 9.2 in the category.
Sun Life’s guaranteed buyback program, in which the firm facilitates the process of selling a book to another advisor, has the majority of the firm’s advisors feeling secure. Says a Sun Life advisor in B.C.: “I can tell you to the penny what our buyback is worth.”
Other Sun Life advisors were relieved that they personally didn’t have to search for a suitable candidate to purchase their business. Adds another Sun Life advisor in B.C.: “CORe is the best thing about working at Sun Life. It has been around for 26 years. If I leave, I am guaranteed a buyback. I don’t have to find a successor.”
“CORe” refers to the firm’s Commission on Release, which is a built-in component of Sun Life’s succession program. “[CORe] is fairly complex,” says Vicken Kazazian, senior vice president of the firm’s career sales force. “Advisors have a revenue stream because of our level commissions; another advisor buys that revenue stream. That’s then offset by the revenue [the buyer] continues to get from that block of business.”
© 2014 Investment Executive. All rights reserved.