Firms rolling out succession plans

It would seem the industry’s recruitment efforts — which often go hand in hand with succession planning — are paying off.

Many firms are offering agents support in creating a documented succession plan for when they decide to bow out of the business. Of the advisors surveyed in this year’s Report Card, 42% have a documented succession plan in place.

“We are trying to bring to the forefront of our advisors that if you are 55 years old and want to retire in five years, you need to build your succession plan now,” says Terri DiFlorio, president of Woodbridge, Ont.-based MGA Hub Financial Inc. “It takes time to [hand over a] business — to find the right person — and that is something you need to start working on now.”

Yet 77% of those surveyed at Hub Financial — at which the average age is 48 — do not have a documented succession plan, more than any other firm in the Report Card. Perhaps retiring hasn’t hit home yet. But it isn’t just Hub Financial; many advisors rarely mention succession planning unless asked directly.

“I was one of the first people to start a full succession plan,” says a Hub Financial advisor on the West Coast. “Ninety per cent of the industry doesn’t have a succession plan, and that is just insane.”

An advisor on the Prairies with Winnipeg-based Great-West Life Assurance Co. , notes aging advi-sors represent a threat to the insurance companies because, as advisors retire, there is the potential for other insurers — and possibly banks — to poach that business.

“Insurers had better get their act together with their distribution systems if they expect to compete with the banks,” the advisor says.

The Co-operators Group Ltd. , based in Guelph, Ont., has made succession planning one of the district managers’ duties. They begin working a year before an advisor’s retirement to find a replacement, says Jim Wingrove, director of agency and sales support.

Many Co-operators advisors — 46% of whom have a succession plan — are not that concerned about retirement planning. “The company takes care of a replacement, so we don’t have to have a succession plan,” admits a Co-operators advisor out West.

Waterloo, Ont.-based un Life Financial (Canada) Inc. has a unique program for its agents’ succession called “commission on release.” Jack Garramone, vice president, career sales force, says every Sun Life advisor has a value placed on his or her business, and the company will buy the business back from the advisor at that value.

“It is one of the advantages we have, in terms of helping our advisors make the transition either to join the company or leave the company,” he says.

Several Sun Life advisors referred to the COR program as “golden handcuffs” — a mixed blessing that keeps agents with the company in order to get the lucrative payoff for their businesses when they leave.

“When I walk away, I’ll get my money, happily ever after, like Snow White,” says a Sun Life advisor in the Maritimes.

Sun Life also has the youngest average advisor age (43), another reason why only 40% of those surveyed have a succession plan.

Other firms are taking a more laissez-faire approach. Toronto-based MGA PPI Financial Group Inc. encourages advisors affiliated with it to create their own succession plans. Often the successor is the agent’s child or relative, or someone the agent has recruited.

“Our prime focus is to help the associate build up his or her own business; then he or she is going to be motivated to bring someone new in to continue on the renewal income and on servicing the block of business,” says PPI’s chairman and CEO, Jim Burton.

Traditionally, the insurance industry has been passed from one family member to another. But that trend is changing — at least, at Aurora, Ont.-based State Farm Insurance Cos. “State Farm is interesting in that respect, as most of our advisors come to us with little or no experience,” says public affairs supervisor Peter Karageorgos.

@page_break@According to Karageorgos, State Farm has employees dedicated to recruiting advisors who possess a familiarity with the regions in which they will be based; referrals from advisors and hiring from within the company are secondary when it comes to replacing advisors.

Co-operators’ Wingrove says that associate agents are often hired to support primary agents at that firm. “From a succession standpoint, some of these agents take over when the agent leaves,” he says.

Richard Williams, president of Toronto-based World Financial Group Inc. , admits his company has had difficulties recruiting fresh talent. “We focus on people who are brand new, people who have not worked in this business before and who are looking for a career change, a new opportunity,” he says.

Williams points out that World Financial, which has an average advisor age of 45 — the youngest among the MGAs — has not experienced any pressures with succession planning because of the age of its advisors. Fifty-two per cent of its advisors have a succession plan.

Sun Life also attempts to attract new people to the insurance business, says Garramone. Many are either students recruited from colleges and universities or people going through a mid-life career change; they make up the majority of recruits. In the past two years, women re-entering the workforce have accounted for 37% of new appointments.

Then there are new Canadians. “Probably more than other companies, we are very respectful of people’s educational achievements outside of Canada,” he says. “Sometimes, sadly, those credentials aren’t recognized in Canada. Our business allows recruits to be in a white-collar field; they have target markets that are easy to identify.”

Hub Financial complements its succession-planning program with support for the business insurance program at Seneca College in Toronto. “[We are] trying to make sure people know that it is there and get people involved,” says DiFlorio.

Great-West Life favours hiring older, more experienced advisors, says Leander Dueck, senior vice president of individual distribution. But, he adds, the company offers a training framework for “subadvisors” who are hired on to an advisor’s producer group, which often provides a built-in succession plan. “Advisors have the freedom to sell and buy blocks of business,” Dueck says. “It is a free market model whereby they choose their successors and at what price.”

One Great-West Life advisor in Ontario has several subadvisors assisting with his business who are being groomed to take over when he retires. IE