Correction: The printed version of this story incorrectly stated that Juvet struck a deal to sell his firm to some of the owners of Bridgeforce Financial Group. The fourth paragraph has been changed to reflect that Juvet is selling the firm to Rod Berry.

As David Juvet, the owner of Ontario East Insurance Agency Ltd., talks about the demographic change in the industry, he literally points to his own head of grey hair.

The gesture shows that Juvet has a personal connection to the challenges of the aging advisory industry.

Juvet, 62, is in the midst of a semi-retirement of sorts, selling Ontario East, a managing general agency he owns privately along with his wife, Mary Martin. It holds about 82,000 life insurance policies in force.

Although the deal hasn’t closed yet, Juvet confirms he’s selling to Rod Berry, vice president at the Ontario East for the past 11 years, along with several minority shareholders that are the principals of three agencies known as BFG Financial (Ontario). While the insurance assets will change hands immediately, the mutual fund assets will close within two years.

“I’m going into personal production when I sell,” he says. “But part of the plan is certainly to play more golf.”

Juvet, a lawyer by education, leaves all the administration that ownership entails and he vacates the office in North Toronto to set up shop inside a property and casualty outfit he chooses not to reveal. (He’s wary of announcing deals before they close; last year a well-known sale to Woodbridge, Ont.-based Hub Financial Inc. fell through.)

Although Juvet is not sailing into the sunset yet, the big change affords him the opportunity and experience to wax about the future, especially on the outlook for the independent insurance brokerage and the ever-consolidating MGA industry — and about retirement and transition itself.

“The challenge I’ve found is convincing brokers that their business can be transferred,” says Juvet.

A large book of in-force policies can pay out a handsome annuity, but it is no surprise that advisors who pride themselves on independence don’t like to be told it’s time to retire and to sell. “Getting people over that hump, to understand that the longer they hold on to their declining asset, the less value it has — that’s the rational side,” he says.

Just as important, on the emotional side, Juvet understands that the social life with clients and structure of the daily business are hard to give up. “Are you comfortable going to the park and the library because you’re not working with as many people anymore?” he asks. “There’s something missing in retirement that advisors don’t want to lose.”

Juvet says the consolidation among the larger MGAs across the country is a fait accompli. But the owners of dozens, if not hundreds, of junior and associate general agencies are facing the same pressures that the senior agencies have experienced for the past couple of years.

Product manufacturers, led by Toronto-based Manulife Financial Corp., the largest insurer in the country, have made it clear that they want to service fewer agencies — and only those meeting certain volumes of business in a solid business structure. Increasingly, manufacturers are demanding the same business discipline, including service for in-force business, efficient administration, up-to-date technology and training for new brokers. Meeting those demands requires a minimum staff and imposes heavy cost pressures, Juvet says.

“There’s no question about it: it’s going to push consolidation in the distribution world further,” he says. “Do smaller agencies have a future as stand-alone entities?”

The answer is, likely, “No.” Juvet sees a few ownership models for life insurance agencies in the future. First, the manufacturers eventually will preside over large, profitable MGAs that are essentially under their control if not actually owned by them. “[The manufacturers] will come to the realization that to influence the way in which products are sold and people are recruited and trained can’t be left to the independent, undercapitalized model, which is what we see today.

“It’s clear to me the manufacturers have to see a partnership with the salespeople,” he continues. “Increasingly, companies are seeing that they have to take on more of the burden and Manulife has been the leader on this. Whether it’s advertising more for Income Plus GIF, or training.”

@page_break@The working model is that of the P&C distributors. “They will try to preserve shelf space without, at the same time, being seen as dictating sales,” he says. “I think that’s partly the way it will go.”

One day, Juvet also sees publicly listed agencies, predominantly owned by an entity such as the Ontario Teachers’ Pension Plan or any other institutional fund, look for assets that deliver cash flows long into the future. They might be traded on the Nasdaq stock exchange, and they would own a group sales arm, a pension arm and a recruiting unit and they would deliver living benefits. Independent planners could sign up.

Finally, the career life advisor roles with Sun Life Financial Inc., London Life Insurance Co. or Royal Bank Life Insurance Co. will always be around, but the independent-minded will always tend to migrate away from them.

National account business with the investment dealers is increasingly important to the manufacturers. That channel is still dominated by the investment side of the ledger; and at the mutual fund dealerships, brokers from the life insurance side will tend to affiliate with dealers that don’t hem them in, says Juvet: “Many planners will say, ‘I left the career model years ago for a reason. I’m not going back to it. I’m not sure it will grow’.”

Earlier in the autumn, Toronto-based DundeeWealth Inc. told its advisors they could no longer maintain multiple MGA relationships and that they would funnel their insurance business through its own agency, Dundee Insurance Agency Ltd. The firm cited regulatory and legal reasoning. Juvet says he knows of no regulatory body that’s demanding know-your-client files for insurance contracts.

Juvet concedes the insurance industry needs to work on transparency. The relationship between the advisors and the manufacturers is clearing up; more and more software allows agents to track underwriting for cases, and that helps speed up the process.

But still, too often a client has no window into why he’s quoted pricing for a product with one company and wildly different pricing elsewhere. Brokers who specialize in product lines can take years to understand the pricing and rating discrepancies for various medical conditions, but even then they are sometimes mystified.

There’s no reason it has to be this way, says Juvet. In many instances, the manufacturers simply check reinsurance manuals for ratings, which are based on underwriting experience around the world. The reinsurers, which guard the manuals closely, see it as proprietary information.

“Get over it,” says Juvet. Time would be saved and misunderstanding avoided if the information were available openly and electronically.

“I’ve always said this industry graduates great salespeople, but not good marketers,” he says. “The point is to get the education out there and help people plan better for their lives.”
IE