For proof that insurance firms retain their advisors, look no further than the dismal scores in the “ease of moving firms” category in this year’s Insurance Advisors’ Report Card. But if you want to know why they keep their advisors, it is not so clear-cut. It very much depends on whom you ask.
Most advisors — with the exception of those at Equinox Financial Group Inc. and Great-West Life Assurance Co. — say they’re staying put because they’re handcuffed by contractual agreements that bind their clients to the dealership, thereby giving them no option but to stay. Ask senior executives for their take on the low scores, however, and they’ll point to their firms’ “value propositions” — top-notch support, paid training or an impressive compensation package — that make it next to impossible for advisors to leave.
Whether it is a case of the ball and chain or the golden handcuffs, one thing is certain:
advisors are finding it harder than ever to leave, and their firms are doing everything they can to keep them.
“You’d have to start all over,” admits a Clarica Financial Services Inc. advisor on the West Coast, commenting on the prospect of going elsewhere.
Part of the difficulty in leaving Waterloo, Ont.-based Clarica lies in its commission structure, which pays advisors a flat compensation over a number of years instead of the more common “heaped” structure, which pays a large amount in the first year.
“What that has done is give us leading customer retention and persistency of business in the industry,” says Clarica president Jack Garramone.
It hasn’t exactly hurt advisor retention, either.
Level commissions provide an impetus for advisors to stick around long enough to reap the full benefit of their sales, he concedes.
Still, he insists, the company’s commission structure is well suited to the right type of agent. “The value proposition at Clarica is different than the primary one in the business; it’s really attractive to someone who’s interested in a career-long relationship with Clarica and who’s interested in developing lifelong relationships with customers.”
Garramone estimates that 60% of new advisors leave within the first couple of years on the job, largely because of the difficulty in building up a client base. After that, it’s smooth sailing: for those who have been at Clarica for more than five years, the attrition rate stands at approximately 6%-7%, he says.
Attrition rates low
State Farm Canada boasts a low attrition rate as well. As with Clarica, clients belong to the firm, forcing departing agents to forfeit their books. Senior public affairs specialist Derek Fee says client ownership hasn’t been an issue with agents, who have chosen to stay on board for other reasons.
In the past year, not a single Canadian advisor has left for reasons other than retirement, he says.
“I think they’re staying because they perceive that State Farm is an excellent company with which to be affiliated,” Fee says. “Many agents stay for 30-plus years. It comes down to what the company’s values are, and people are dedicated to the kinds of values the company represents,” he says.
At least one agent agrees: “We can’t take our clients with us, but I have no desire to go,” says a State Farm advisor in Alberta.
Freedom 55 Financial has its own special formula for retaining advisors. “It all comes down to what we think is an outstanding value proposition for new advisors,” says Nick Pszeniczny, senior vice president of Freedom 55 in London, Ont. The firm invests approximately $100,000 to train, coach and educate each incoming advisor in an effort to get advisors “indoctrinated into their careers.
“Our goal is to ensure that we make the right selections when we bring them on, and then train them adequately,” Pszeniczny says.
At Guelph, Ont.-based The Co-operators Group Ltd., Jim Wingrove, director of the agency department, credits a generous “transition payment” upon retirement for the firm’s strong retention rate. As the value of advisors’ businesses and length of service grows, so, too, do their compensation packages.
“Our agents don’t have to go out and try to sell their businesses. They know what their value proposition is on the back end, and I think that’s part of the reason our retention is so great,” Wingrove says. “The profitability and the volume of their book is going to re-ward them in the long run.”
@page_break@What does that means to advisors? “They keep us on a pretty tight rein,” says a Co-operators agent in Ontario.
But not all advisors feel that way. Scores for “ease of moving firms” were significantly higher at Equinox (7.9) and Great-West Life (7.7). At those firms, advisors are in control of where they take their business.
“There’s no contractual reason why advisors can’t move,” says Leander Dueck, Great-West’s senior vice president of individual distribution in Winnipeg. Although Great-West employs a level compensation structure similar to that of Clarica, Dueck says, the firm facilitates transfers as advisors wish: “They can leave whenever they want and there’s no problem taking clients with them.”
The situation is similar at Toronto-based Equinox, which positions itself as a support network for MGAs and their advisors. “Each of the companies we deal with has transfer rules about how advisors can move from one MGA to another,” says Daniel Dessureault, Equinox’s general manager.
“Advisors are free to move.” IE