In their attitudes toward selling insurance, members of Canada’s brokerage community still stand as divided as the Hatfields and the McCoys. And you don’t have to ask many questions to see clearly where a broker draws the line.
Some brokers embrace insurance with gusto as a critical element of financial planning, while others reject it, with equal vigour, as a betrayal of their principles as stockbrokers. “The day I start selling insurance,” says a broker with National Bank Financial in Quebec, “is the day I leave this industry.”
As an official policy, brokerage firms downplay the controversy and emphasize the importance of insurance as a financial-planning tool. In fact, insurance has made an increasingly large contribution to the retail brokerage business over the past few years. “It’s the fastest-growing element of our business on the retail side,” says George Kamphorst, vice president and manager, insurance services, at Merrill Lynch Canada Inc. in Toronto. But Kamphorst admits that brokers need to be coaxed to use insurance in their arsenal of investment products. “It’s been a bit of a transition,” he says.
Brokers themselves present much stronger views. And many would agree with an Ontario broker at TD Evergreen Investment Services Inc., who says, “We don’t do any one thing well any more. All of the bank-owned firms are trying to get their representatives to provide the whole range of financial services, and I think we end up suffering from a loss of credibility.”
At the heart of the issue are concepts involving risk, estate planning, wealth management and the role of a broker. In pursuit of a workable financial plan to make money, for example, brokers ask their clients how much risk they can tolerate. Insurance agents, seeking to preserve their clients’ capital, ask them how much risk they want to eliminate to gain peace of mind. Each approaches risk from the opposite direction and, in the opinion of many stockbrokers, at least, the twain shall never meet. “There are guys here who sell it all and say they know it all, but I don’t believe them,” says a broker in Toronto with CIBC Wood Gundy.
But clients look to their stockbrokers for a wider range of investments, including insurance products, to help them meet their financial challenges. “A lot of clients expect their financial advisors to help them with estate planning, intergenerational wealth transfer and other issues,” says Ron Sakkal, executive vice president and managing director, private planning group, at Goepel McDermid Inc. in Toronto. “Insurance is a tremendous tool for that.”
Kamphorst says clients also change their priorities as they grow older. “Instead of seeking to build up their assets, as they do when they’re younger, people want to protect the assets they’ve already accumulated,” he says. “Now they have it, they want to keep it, and insurance products help do it.”
Clients who run their own businesses also need help with succession planning, which can often involve insurance products. “Having an insurance licence is a big asset,” says a TD Evergreen broker in Toronto, “particularly when a client needs help with business- succession planning. I’ve sold insurance to maybe only five or six people in the past year, but it’s a good market to get into.”
Sakkal emphasizes that his company does not compel its representatives to market insurance products. “But there are a lot of benefits to having it,” he says.
Throughout the country, a growing number of brokers have recognized these benefits. “I truly believe it’s a function of the job,” says a representative with Wood Gundy in the Maritimes. “You can’t be dealing with a 51-year-old client without selling insurance.”
Likewise, a broker with TD Evergreen in Ontario says he regards insurance “as an important component of what we do.”
The benefits of insurance extend to brokers themselves as well as their clients. One broker with TD Evergreen in Toronto estimates that he derives 60% of his new business from clients seeking insurance-related products. “We’re talking the full gamut, from seg funds to wills and term insurance.”
Another broker, with Goepel McDermid in Vancouver, says he just obtained his licence to sell insurance and already generates 30% of his business from insurance-related products. And a broker with ScotiaMcLeod Inc. in Toronto says he has made $15,000 from just three insurance-related sales. “The payout is disproportionately high,” he says.
Even within the same firm, brokers offer divergent opinions about selling insurance products. Other brokers at Goepel McDermid say insurance has made little or no difference to their business. “I do have an insurance licence,” says a rep in Toronto, “but I hardly do any business – maybe 4%.”
In Western Canada, another GM rep says insurance is a nominal part of her business. “Less than 5%.” And a third GM rep in Ontario says insurance is a “negligible part of his business. I don’t even want to go there.”
In fact, many brokers regard insurance as a completely different specialty unrelated to their own business of helping their clients accumulate assets and profit from promising investment strategies. “I personally am not interested in selling insurance,” says a Canaccord Capital Corp. broker in Toronto. “In my opinion it’s a disservice to my clients to try to be everything. I am not an insurance agent, I am not an accountant and I am not a lawyer.”
Or, as a broker with Wood Gundy in Toronto says, “You don’t go to a dentist when you need a brain surgeon.”
While many brokers say they won’t sell insurance products directly, they will refer clients to an insurance specialist. Larger brokerage firms have hired specialists to provide brokers with support and to give clients a full range of financial, investment and insurance products. “We’ve placed estate-planning advisors in our branches,” says Sakkal.
Merrill Lynch provides a similar arrangement. It has 22 specialists in Merrill offices from Halifax to Vancouver. Of the 1,400 investment advisors at RBC Dominion Securities Inc., 1,100 are licenced to sell life insurance, says Ted Alexiadis, national insurance marketing consultant for DS in Toronto. As well there are 14 dedicated insurance specialists to work with brokers across the country.
Specialists relieve brokers of the challenge to educate themselves in a field that’s completely unrelated to selling investment products, says Kamphorst. “Either one is a full-time job.”