Insurance advisors have given their firms very high marks for strategic focus this year. The average rating in the category jumped a full point, to 8.1 from last year’s 7.1, making it the second-largest increase in the 23 categories surveyed.
The gain may reflect the shifting fortunes of the market and a change in management thinking — a move back to providing insurance and away from wealth management.
Research for Investment Executive‘s 2004 Insurance Advisors’ Report Card found a distinct trend in advisors’ compensation away from investment products and into insurance products. This was not a surprise to Leander Dueck, senior vice president of individual distribution at Winnipeg-based Great-West Life Assurance Co.
The largest growth in compensation at Great-West Life has been in the group benefits area, he says, partly because of its ability to provide cost-effective group benefits. There has also been a slight increase in compensation for life and living-benefits insurance, and a slight decrease in commissions earned on mutual and seg funds.
A Clarica Financial Services Inc. advisor in Alberta affirmed such an industry shift. “They are moving away from wealth management,” he says, referring to his managers. An Ontario advisor with Freedom 55 Financial made a similar comment. “They were stressing investments for a while. Then they made us self-employed, and the bonusing is now redirected from investments to insurances policies,” he says.
Clearly the majority of insurance advisors are finding a level of comfort with this development. At Equinox Financial Group Inc., the rating for strategic focus jumped to 8.1 from 6.8. At State Farm Canada, it surged to 9.1 — the top score — from 7.3 last year.
Most companies, whether they consider their sales force to be independent or “captive,” view their advisors as key to corporate success. “We think the reason clients do business with us, more than anything else, is the advisors,” says Jack Garramone, Waterloo, Ont.-based Clarica’s vice president of independent career advisors. (Clarica advisors are part of a career system.)
“Our strategic distribution focus for our retail operations in Canada is built around the concept of an advisor’s job being valued as a full-time professional career,” Garramone adds. “So we value it in a variety of ways: the money we invest in bringing people into the business; the financial support we give them for the first five years; the managerial infrastructure that we put in place to help select, train, develop and coach; the investment we make in our brand; and the investment we make in training and development.”
Great-West Life does not see itself as a training organization. It recruits experienced advisors with good track records, yet its focus is similar to Clarica’s. It sees itself as a “Tier 1 supplier,” says Dueck. It offers top-producing advisors a diverse, low-cost product line — life, group, living benefits and investment products — with excellent support services, he says. Its compensation package “levelizes” payouts, meaning advisors are rewarded for repeat business rather than bringing in new business, says Dueck.
Freedom 55, a Great-West Life subsidiary, has a similar focus. Both Great-West Life and Freedom 55 advisors sell products from other companies within the family. Nick Pszeniczny, senior vice president of London, Ont.-based Freedom 55, says his company’s role “is to continue to provide a strong value proposition so advisors can receive the appropriate value from our organization, regardless of the markets they choose to be in.
“If somebody is working in the concerned family market or the high net-worth market, we believe very strongly that we have a specific value proposition to support each particular market the advisor chooses to operate in,” he adds. “We also provide a fair amount of freedom so advisors can operate more independently from the financial centre and establish their own brand if they don’t want to use our Freedom 55 brand.”
Supporting growth and profitability is a focus that is often repeated by corporate executives, no matter what the structure of the company. Equinox’s primary customers are independent agencies, which hire their own advisors. “Our strategic focus is to support their growth and help their profitability. So we try to help them on the top line and the bottom line,” says Daniel Dessureault, the general manager of the Toronto-based firm.
Bob Cooke, senior vice president and CEO of Toronto-based State Farm Canada, points to factors in the auto insurance business that have affected his company’s strategic focus. He says the unprecedented explosion in automobile insurance costs was difficult to foretell. That, combined with moves by several provincial governments to roll back premiums has resulted in strategic reassessment.