Advisors surveyed for this year’s Brokerage Report Card noted that, on average, insurance products make up only 4% of their product sales and insurance revenue declined to $62,813 this year from more than $71,000 last year. But they also reported that clients are seeking safety in segregated funds, which now account for the second-largest portion of the average advisor’s insurance business, at 33% vs 22% last year.
Although risk-averse clients surely contributed to this growth, another likely explanation comes from the popularity of the guaranteed minimum withdrawal benefit. The product, which employs seg funds, was pioneered in Canada by Manulife Financial Corp. with the Manulife IncomePlus GIF in 2006. But Sun Life Financial Inc., Desjardins Financial Securities Inc. and, most recently, Transamerica Life Canada are among the insurers now offering the GMWB.
As one advisor with Scotia-McLeod Inc. on the Prairies acknowledges, clients are thinking more about guarantees: “Everyone’s giving it more thought. It’s a conversation we’re having a little bit more.”
The sales of the GMWB product line, which guarantees the return of the client’s deposit at a set percentage every year in retirement until death, comes mostly at the expense of traditional term and permanent life insurance. Term life is now 21.9% of the average advisor’s insurance business, down from 30% a year ago; permanent life is now 35.5%, vs 40% a year ago.
Industry consultant Byren Innes, senior vice president with NewLink Group Inc. in Toronto, says the sharp change in that product balance challenges logic because a client’s need for term or universal life should not, in theory, have a direct relationship for his or her need for GMWB investment products.
Most advisors’ clients would use life products for estate and tax planning purposes, he says, while the GMWB is a retirement-income planning vehicle. Although the need for one purpose does not negate the need for the other, advisors and their clients may well be thinking for the short term this year, considering the market turbulence.
Innes also notes that insurers such as Manulife and Sun Life have not only hired more wholesalers to service advisors on wealth-management products but life insurance wholesalers have also been given the nudge to make sure investment options are part of the conversation. “There’s been a little more collaboration with the wealth-management side,” he says, “and cross-leveraging with their efforts.”
Possibly on the back of GMWB sales, advisors rated their firm’s support for insurance planning at 8.2 on average last year, up from 7.6 in 2007; this year, they reverted somewhat, as advisors gave the category an overall average rating of 7.8.
These ratings relate to how well investment dealers are servicing advisors’ insurance needs. And for the second year in a row, the top score in the category — 9.4 — belongs to Toronto-based Richardson Partners Financial Ltd. This probably speaks to the firm’s use of permanent life insurance for estate and business planning. In those contexts, advisors who understand the product speak of its tax-free benefits.
“Anything less than a 9.0, there would be something wrong,” says a Richardson Partners advisor on the Prairies. “The lifeblood of our business is planning.”
Richardson Partners president and CEO Sue Dabarno says that 95% of advisors at the firm hold an insurance licence. Teams of advi-sors often include insurance specialists, but the brunt of the support is provided by what is known internally as Richardson Partners family wealth planning group.
And although Woodbridge, Ont.-based Hub Financial Inc., a full-service managing general agency, can take part of the credit for the higher ratings — Richardson Partners outsources the administration and back-office processing of its insurance business to Hub — Dave Finnbogason, Richardson Partners’ chief financial officer and senior vice president in charge of the family wealth planning group, also credits head office’s support in both Toronto and Winnipeg.
The ratings for the Report Card, however, say nothing about the model each firm uses for supporting insurance planning. And the approaches vary greatly.
Advisors at most bank-owned brokerages scored their firms at 7.5 or better. But, if you compare their service models to, say Winnipeg-based Wellington West Capital Inc., which scored an 8.8, it’s apples and oranges.
Wellington West Financial Services Inc., through which the firm’s insurance flows, sends its processing toIDC Financial Inc. in Toronto, although its training, case development, quotations and marketing resides within Wellington West FS.
@page_break@Advisors with Toronto-based RBC Dominion Securities Inc., which had the top rating in the category among bank-owned firms — 8.5 — supports its advisors with 29 insurance specialists, along with staffing for wills and estate planning. DS also has its own MGA.
David Agnew, DS’s national director, describes a support team of about 150 in wealth management, 29 of whom are insurance specialists: “These aren’t salespeople. They are based both at head office and in branches. We’ve developed it over the years.”
Similarly, TD Waterhouse Private Investment Advice, BMO Nesbitt Burns Inc., CIBC Wood Gundy and ScotiaMcLeod, all based in Toronto, each employ 20 or more insurance specialists — but the depth of the support differs.
And that is what upsets advi-sors in far-flung branches. “There’s only one person for this big area,” laments a Wood Gundy advisor in British Columbia.
At Montreal-based National Bank Financial Ltd., which posted the lowest rating among the bank-owned firms (6.9) for the category, that problem is critical. NBF has doubled the number of insurance specialists to four from two, but advisors still feel the support isn’t there. “There’s someone who works for a number of branches,” says an NBF advisor in New Brunswick, “and is spread thin.”
Among the national independents, Raymond James had the top rating, an 8.5. Raymond James runs its own MGA, says Doug Salberg, president of Raymond James Financial Planning Ltd., a division that offers insurance and estate-planning support in Vancouver. Quotations, marketing and training are handled internally, but the firm outsources new-business processing and some policy services to FasTrac Canada, an insurance administration firm based in Concord, Ont.
Mississauga, Ont.-based Edward Jones, another independent, also offers an in-house MGA, but product and marketing support tends to be offered by insurance company wholesalers, say advisors.
At Toronto-based Blackmont Capital lnc. , a lot of the support resides with its sister firm, Assante Wealth Management (Canada) Ltd.,which suits Blackmont CEO Bruce Kagan just fine. “We have a Blackmont specialist, too, who does provide support,” he says. “There’s no doubt we offer and support insurance. But if I was to say it was a focus, I’d be lying.”
Toronto-based GMP Private Client LP outsources kit and caboodle to Toronto-based PPI Financial Group Inc., a full-service MGA that includes planners, sales, administration and marketing, an arrangement the pleases GMP advisors. IE