As far as metaphors go, Les Herr, who becomes president and CEO of Kingston, Ont.-based Empire Life Co. on April 1, can offer an apt one for life in financial services: he learned the fundamentals of the advisory business by guiding boaters down the gentle Avon River in his hometown of Stratford, Ont.

The Herr family owns Avon Boat Rentals, a tourist favourite in Stratford, home of the Shakespearean theatre festival that regularly draws patrons, famous and otherwise, from many countries. From the age of five, Herr was part of the hubbub of the family business.

“From a very early age, I learned to talk to all sorts of people,” says Herr, whose brother has taken over the business from their parents. “Every summer since I was old enough, I worked at that place. I loaded and unloaded customers, worked in the concession stands and drove the tour boat. I just became so comfortable around various people — young, old, famous, not famous, you name it.”

Whether you’re navigating the boat for actress Jessica Tandy or Hal Jackman, the major shareholder of parent E-L Financial Corp. , “steady as she goes” will do just fine. It’s an especially fitting approach for the insurance industry, famous for its conservative, slow but steady approach.

Empire is the ninth-largest life insurer in Canada and the fifth-largest in the segregated fund market, in which it has increased its share of industry assets under management to 5.9% in 2007 from 4.6% in 2005, according to Investor Economics Inc. of Toronto.

In Empire’s fiscal year ended Dec. 31, 2007, the company reported premium income of $631 million, up from $602 million in 2006. Total revenue was down slightly in 2007 to $918 million from $923 million in 2006, the result of lower investment income valuations.

Earnings, as well, have been slipping slightly. In 2007, Empire contributed $44 million to E-L Financial’s bottom line, down from $46 million in 2006. E-L Financial owns most of Empire through its 81% ownership of E-L Financial Services and also owns all of property and casualty insurer Dominion of Canada General Insurance Co. E-L Financial reported earnings of $92 million in 2007, down from $141 million in 2006, mainly due to lower underwriting results in the general insurance business.

Herr’s plans for the future include expanding Empire’s operations in Western Canada and in the Atlantic provinces, where local economic conditions continue to improve. About seven years ago, the firm decided it needed to cast a wider net nationally. Doug Hogeboom, the outgoing CEO, had made a commitment to visit the western provinces at least six times a year; Herr intends to do the same.

Empire — “the No. 1 mid-sized firm,” as Herr calls it — maintains a historically strong relationship with independent personal agents and the managing general agencies across the country in all product lines. More and more, he says, planning firms and traditional investment dealers are seeing the benefit of working with a smaller firm.

“We’re on a first-name basis with our business partners. And that goes throughout — from the wholesalers all the way up,” he says. “We have a tendency to be more personal. We differentiate ourselves with a different level and type of service.”

Herr says that along with the rest of the insurance industry, Empire needs to find a more efficient way to deliver products to clients through advisors.

“Technology is the enabler,” he says. “But it’s even as simple as asking how much paper you need to get a policy delivered. What’s the order process? We’re doing our best under the current paradigm, but we need to rethink that.”

If the advisory channels can’t find a way to deliver the product, other distribution methods will develop, Herr says, likening that concept to President’s Choice and Canadian Tire and their impact on the banking industry. Both companies have taken a slice of the consumer banking business.

When it comes to Empire’s markets, Herr believes there is still room to grow in the middle market, partly because middle-income consumers have been overlooked at times in the rush to service high net-worth clients.

“The advisors and the principals in [the MGA channels] are aging, and they work in the mid-income marketplace,” he says. “But they’re not getting at it. There’s significant opportunity in the insurance industry for us to step back and start looking at that marketplace. If it doesn’t [get what it wants], it will get services in other ways.”

@page_break@While the means of product distribution widens — via retail and electronic channels — Herr wants to ensure the value of advice is maintained.

“Between the competition for market and the economics [of delivering advice],” he says, “the value of advice is getting cheapened and commoditized.”

Keeping the quality of advice high also means maintaining premiums, Herr says. Through salary or commissions, advisors need to be paid — and that needs to be reflected in product premiums.

“It’s that simple,” Herr says. “As premiums go down, so does the compensation. We aren’t going to attract new people to the business if we get to the point at which insurance is a commodity.”

Among the new initiatives, Empire is considering a version of the latest insurance product, segregated funds with the so-called “guaranteed minimum withdrawal benefit.” Herr would be happy to have a GMWB product out within the next six months, but he’s not pushing it.

“If, as we evaluate the product and its risk profile, there’s a good chance we would want to have it, that’s fine,” he says. “But we’re a conservative company and we’re going to make sure we line up all of our ducks. If it means we’re out in six months, that’s great; if we’re out in a year, that’s great, too.”

Herr is not afraid of being left behind; rather, patience gives the firm time to stake out its own territory. He points out that Empire didn’t carry a universal life product until 2000 but has still seen strong growth in that line, even though it was “late to the game,” he says.

The GMWB is a new product in Canada, and advisors should take the time to understand what they’re selling and clients what they’re buying, Herr says: “And even then, I would never recommend a client puts all his or her capital into it. We just want to make sure we do it right.”

Herr started off as a London Life sales rep in the early 1980s, straight out of his undergraduate degree in biology at the University of Western Ontario in London, Ont. Canada was in a recession. While sales training was a practical place to start, Herr admits he always aimed for management. “My whole life has been sales or sales management,” he adds. “Then, progressively, I got more involved in the operations and product side, and economics of the business, ultimately.”

Herr was regional vice president for Ontario at London Life when he joined Empire in 1999 as a sales director for Ontario. When describing his gruelling first two years at Empire while also picking up an executive MBA from Queen’s University, Herr laughs. “Gotta get that MBA,” he says. “But that’s why I’m doing what I’m doing today.” IE