Although insurance advisors say compensation isn’t their only priority, it remains a key factor in how they feel about their firms. Advisors surveyed for this year’s Insurance Advisors’ Report Card gave their firms a modestly improved overall average rating in the “firm’s/MGA’s total compensation” category — to 8.2, up from 7.9 last year.
However, results varied from firm to firm, with one company in particular weighing down what would have been an even higher overall rating. That distinction fell to Mississauga, Ont.-based RBC Life Insurance Co., which received a rating of 7.1 in the category, the lowest among the nine firms in the survey. More significant, this represents a drop of one full point from the firm’s 8.1 rating in last year’s survey — the biggest decline seen by any firm.
This relatively low score appears to be a result of some RBC Life advisors’ concern or disappointment over the firm’s new compensation regime, which is set to come into force this fall.
Under this new compensation regime, the firm will retain its “heaped” commission structure and will pay bonuses monthly based on a three-month rolling average. The maximum amount of bonus payable is being raised to 120% of commissions earned — an increase of 20% from the previous level. The dissatisfaction, however, comes from the fact the minimum commission levels needed to reach bonus tiers are also being raised.
“We did some research and determined that we were paying out too much at the lower end and not paying out enough to our better producers,” says Ernie Murdoch, senior vice president of career sales with RBC Life. “The opportunity is there for everybody, but the higher payout exists [for] better producers.”
RBC Life advisors who expect their compensation to drop under the new setup were not so pleased. Says an advisor in Ontario: “I’m not impressed with the bonus structure.”
Others, however, felt that the new regime is fair and that they will benefit personally from it. Says an RBC Life advisor in Atlantic Canada: “All of our targets are very achievable.”
And, finally, some RBC Life advisors said the overall support they receive from the firm is worth any perceived differences in compensation among RBC Life and other firms. These advisors also felt their businesses benefited from the strength of the brand. “When you sell [Royal Bank of Canada-branded] products, there is a certain amount of brand equity that is levied,” says an RBC Life advisor in Ontario. “If I worked at a smaller firm, I would not have as many doors opened to me.”
Meanwhile, one firm with an increased rating in the category is Waterloo, Ont.-based Sun Life Financial (Canada) Inc., which, like RBC Life, operates on a dedicated sales agency model. Sun Life received a rating of 7.6 in the compensation category, up by 0.4 of a point from 7.2 last year.
Sun Life advisors appear to be happy with the firm’s “levelled” commissions compensation regime, in which payouts are spread out over the life of a policy rather than during the first year.
“If you keep a certain level of production, your income is good,” says a Sun Life advisor in Ontario. “It becomes exceptional if you maintain a high level of production.”
@page_break@Sun Life executives say the firm’s compensation system helps promote the building of long-term service relationships between advisors and their clients. “It aligns the interests of the client, the advi-sor and the company,” says Vicken Kazazian, senior vice president, career sales force.
Sun Life advisors also receive a variety of support, such as marketing materials and access to estate and financial planning support, free of charge. Says Kazazian: “We pay for it to ensure that our clients are getting the best service possible.”
Nonetheless, some Sun Life advisors say they aren’t pleased with the percentage of commissions and amount of bonus payout they are receiving. Says an advisor in British Columbia: “A lot of money goes to management we never see. There are a lot of levels of management taking a cut.”
Mississauga, Ont.-based managing general agency IDC Financial Inc. received the highest rating — 9.5, up slightly from 9.3 last year — among all firms in the survey. IDC advisors laud their firm’s compensation structure, which sees them getting all of the commissions on insurance sales and a share of the overrides, based on productivity. “The compensation structure is very easy to understand,” says an IDC advisor in Ontario, “and they pay us well.”
Another MGA, Calgary-based PPI Solutions Inc. (formerly known as Financial Management Group of Cos. Inc.), received a rating of 9.4 — the second-highest in the survey. PPI Solutions’ compensation structure is based on an advisor’s production level and the amount of support he or she requires from the firm. “I can go elsewhere and get more, but I like how everything is handled — the efficiency,” says a PPI Solutions advisor in Alberta. “It’s not just the money; it’s the overall service.”
Advisors at Woodbridge, Ont.-based MGA Hub Financial Inc. rated their firm’s compensation at 8.1, up by 0.2 of a point from 2009. Advisors feel that Hub’s compensation structure gives them the freedom to select the products that are best suited for their clients. “Hub doesn’t favour one carrier over another,” says a Hub advisor in Ontario, “so you get to do what is best for the client and the advisor.”
Advisors with Calgary- and Toronto-based specialized MGA PPI Financial Group Inc. continue to be happy with their firm’s compensation structure. Although these advisors concede that other firms offer higher payouts, they point out that their firm’s support helps them grow businesses. PPI Financial advisors gave their firm a 7.8 rating in the compensation category, down by just 0.1 of a point vs 2009. “PPI [Financial] creates value,” says an advisor in Quebec. “Any perceived reduction in revenue is far exceeded by the value created through the partnership.”
Adds a colleague in B.C.: “You sacrifice a little override for a whole lot of support.”
Advisors with the Vaughan, Ont.-based Canadian operations of World Financial Group Inc. are drawn to their firm by its unique business model and compensation structure, which rewards advisors for growing their business, both by selling products to clients and by attracting new agents to the firm.
Says a WFG advisor in Saskat-chewan: “If you build a business by recruiting, you will end up with higher [pay] than an individual.”
IE