PFSL scores top marks overall

The PFSL reps themselves can’t say enough good things about their company. “They never hesitate to do what it takes,” says one rep from Ontario. “They almost overdo it.”

The company, it seems, is on a roll. After 15 years in Canada, parent Primerica Financial Services (Canada) Ltd. boasts one of the country’s largest sales forces, with some 5,300 licensed insurers, 82% of whom are also licensed to sell mutual funds. They’re selling a lot of insurance — $8.2 billion of policies in Canada last year, which puts them in the top five in the country. The company, which is in turn a unit of U.S. giant Citigroup Inc., raked in a further $733 million in investment fund sales in 2001 (off slightly from the company’s record $925 million in 2000). The Primerica Concert series of funds (a series of fund-of-funds based on AGF Funds Inc. products and chosen by Citigroup co-company Salomon Smith Barney) are approaching $5 billion in assets under administration. “We’d rank quite high if we were a mutual fund company,” says Dumanski.

It must be noted, however, that PFSL’s victory is received with some misgivings in the planning business. Trying to balance the views of an entire industry is a delicate job, and we know there are those out there who will grumble about the results. PFSL, for those who don’t know, occupies a slightly controversial orbit in the financial planning universe.

Primerica grew out of U.S. insurance firm A.L. Williams, which took as its company motto the saying, “Buy term and invest the difference.” Customers were counselled to cash in whole-life insurance policies, buy cheaper term policies and then invest the rest in the company’s mutual funds (leading to the company’s salespeople being dubbed “term-ites”).

The policy, say critics, led to abuses — situations in which people cashed in perfectly good whole-life policies and ended up stuck with skyrocketing insurance costs when they advanced in age and their term policies expired.

The firm also comes in for criticism because it is what is known as a “multi-level marketer” (MLM), a company in which those “upline” of new recruits receive some of the revenue generated by those they bring into the company. It’s a structure similar to Amway Corp.’s, for which the more recruits one brings in the better one’s personal revenue.

Internet chat rooms are filled with former employees who criticize the MLM structure. They say it results in a company that’s focused on recruitment rather than the needs of the client. They also accuse the firm of maintaining a poorly trained sales force (few advisors have a CFP designation) that is often left out in the cold after senior reps have burned through a recruit’s family and friends for a quick buck. There is no shortage of former employees, as turnover can approach 90% a year. Critics also complain that recruits don’t get paid for their own training (a practice recently challenged under Ontario labour law) and often end up giving more money to the company than they earn.

Dumanski, however, bristles at the criticism: “People don’t find out for themselves what we do and how we do it. They listen to other folks on what they think happens at Primerica.”

“A valuable service”

He says, of all the policies sold, only some 30% are replacement policies “and we abide by all the laws and regulations on disclosure at time of replacement.” As for criticism about the MLM compensation structure, Dumanski says, it’s no different than what goes on at any of the large firms.

“We like to refer to it as a ‘hierarchical’ structure. It’s really just a different version of what happens in any branch office system across Canada, in which the manager takes a bit off of what everyone there is making. It may be a slightly different form, but people know it’s out there. It’s published what they get at what level they’re at,” says Dumanski. In fact, he says, the company provides a valuable service by delivering financial services to a broad swath of middle- and lower-income Canadians who are passed over by the bigger firms, focused as they are on high net-worth clients.

“We have a niche of under-served people. We’ve seen article upon article in which planners and advisors say they’re not going to manage anyone with less than $100,000. We’re saying to people, ‘You don’t need a lot of money. We’ll come to your table for $25 a month’,” says Dumanski.

He also counters criticism that the sales force is not well-trained. “Our people get licensed through the same provincial process as anyone else. We meet the requirements set forth by regulators,” says Dumanski. In fact, he says, the company gives individuals a chance who might otherwise not be able to break into financial services. “We provide an inclusive opportunity, not an exclusive opportunity. You can’t tell who’s going to be a winner and who’s not, so we give everyone the opportunity to try at Primerica. We’ve seen a lot of people who may not have appeared to be the best candidate who do incredibly well,” he says.

Nevertheless, critics continue to set Primerica apart. Victor Conrad, it could be said, comes from the other end of the spectrum. He has an accounting degree, a CPA, CFP, CHFC and a PFS, as well as Series 6, 62, 63 and 65 securities licences, along with life, health and annuity licences in several U.S. states. Not to mention he’s a member of the Million Dollar Round Table. He runs an ethically based advisory practice near Pittsburgh, where, as a young advisor, he used to run into old A.L. Williams reps. He takes exception with the many part-timers in the current organization.

“If you talk to anyone in the industry, you don’t do well from a financial, education or knowledge standpoint if you do it part-time. You have to do it full-time. I hate to say it, but getting an insurance licence is easy,” says Conrad. “When someone asks you about joining their organization, I say run as fast as you can the other way.”

The controversy over the competency of Primerica reps touches on a current debate in Ontario. Should someone calling themselves a planner be required to hold a CFP? Conrad, although he’s based in the U.S., thinks that’s a good idea, as he balks at calling Primerica reps “planners.” He argues that because Primerica reps sell only term insurance (according to Dumanski, the company is “100% term all the time”), that prevents them from doing a valid financial plan. “How can you do planning if you don’t offer all of the options? That’s the ethical problem. I’d be upset if they called themselves planners. It’s across the line if they do,” says Conrad.

Primerica reps actually don’t call themselves planners as a matter of company policy. On the Primerica Web site the “Important Disclosures” page reads: “Representatives are not financial planners, investment advisors, financial consultants or other specialists who provide financial advice.” Which explains to some extent the grumbles IE hears about the outcome of the Report Card year after year.

Until the semantics are settled, however, the PFSL reps continue to go door to door, racking up sales.

“I think we’re doing what’s right for Canadians, so I’d give us a 10,” says one. IE