Although life insurance agents aren’t subject to the new disclosure requirements under the second phase of the client relationship model (CRM2), they should adopt these principles proactively, according to a panel of experts who spoke at the Independent Financial Brokers of Canada’s spring summit in Toronto on Thursday.
With new rules kicking in next month that will require investment dealers to provide clients with reports outlining the fees and performance associated with their accounts, clients are likely to begin expecting this type of information from all of their financial services products, including insurance, said George Aguiar, president and CEO of Mississauga, Ont.-based GP Wealth Management Corp.
“Clients want this information,” said Aguiar. “If you’re [offering] both segregated funds and mutual funds and you’re not providing the same level of reporting on the insurance side, you will get clients who are going to ask that question.”
In addition to pressure from clients, the insurance industry may soon face pressure from regulators to step up their disclosure practices. The panellists said they expect insurance regulators to implement rules similar to CRM2 eventually.
“Where we are on the investment side, the insurance side will eventually get there,” Aguiar said. “I think there’s an appetite for that from the regulators.”
Thus, insurance agents and distribution firms should be proactive and extend the CRM2 disclosure principles to the products they sell, such as seg funds, so that there is consistency in the type of information clients are receiving, he said. That’s particularly important for dual-licensed advisors as they may encounter clients who are confused by the differences in reporting on their investments vs their insurance holdings.
“We want to make sure that [our advisors] are not on their heels having to explain why one product is reporting in a certain way and other products are not,” Aguiar said.
GP Wealth Management, which operates both a mutual fund dealer arm and a managing general agency, has taken steps to harmonize its practices on both sides of the business in order to create a consistent experience for both advisors and clients.
“We operate our insurance/seg fund business identical to our mutual fund business from the account opening process right to the reporting process,” Aguiar said. “We see this as a way to make sure investors have the same experience whether they’re on the mutual fund side or in the insurance channel.”
This consistent approach is likely to resonate with clients as they get used to the new CRM2 disclosure regime, said Susan Silma, co-founder and partner at CRM2 Navigator.
“It’s great that dealers are approaching it this way,” she said. “Because CRM2 is so client-facing, and clients will start seeing this information, I can fully predict that clients will start asking for it if they don’t have it on another set of products.”
Insurance agents should prepare for these kinds of questions, Silma said. In addition, she urged insurance agents to begin talking to clients about their value proposition given the possibility that they’ll eventually be forced to provide new disclosure around fees and compensation.
“If you’re able to, start all of these conversations a little bit sooner, even if you don’t have to have them,” she said.
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