Relative calm for insurance advisors

This year’s insurance Advisors’ Report Card results paint a relatively tranquil picture of the insurance space. The report includes three dedicated sales agencies (DSAs), four managing general agencies (MGAs) and one personal producing general agency (PPGA). The advisors who either work for or run their businesses through these agencies collectively gave them an IE rating of 8.2 for the third year in a row. (An IE rating is the average of all of a firm’s category ratings.)

Respondents were similarly consistent in rating MGAs higher on average than DSAs. This year, advisors gave the MGAs a collective IE rating of 8.8 and the DSAs a collective IE rating of 7.8, compared to 8.8 and 7.7, respectively, in 2018 and 9.0 and 8.2 in 2017. Looking across all agency types and categories (excluding the IE and overall ratings by advisors), fewer ratings improved or declined significantly (by 0.5 or more) year-over-year: only 31 rose by that margin, vs 42 in 2018, while only 18 dipped, vs 53.

Advisors’ highest ratings for the MGAs were “freedom to make objective product choices for clients” (average of 9.8), followed by “firm’s/MGA’s ethics” (average of 9.6). Many advisors working through these agencies valued their “unbiased” sales approaches. “I can’t be put in a cage and told what to sell. I’d give them an 11 if I could,” says one advisor with Woodbridge, Ont.-based Hub Financial Inc. in Alberta.

DSAs, meanwhile, received their highest ratings for firm’s ethics (average of 8.9) and firm’s stability (average of 8.8). Even though advisors across the board cited recent strategic and leadership shifts, many at the three DSAs said they like that their firms have financial clout and well-known brands. “We’ve been around longer than Canada has been a confederation,” says an advisor with Waterloo, Ont.-based Sun Life Financial Distributors (Canada) Inc. in Ontario.

Nearly all agencies were more successful this year at offering succession and/or retirement programs for their advisors. Not only did the performance average for the category rise significantly year-over-year, to 8.4 from 7.9, but this year also marked the first year in the past decade during which all firms included could be given ratings for their succession programs.

While 87.4% of advisors said their firms have a succession program, only 50.4% of all advisors said they have a documented succession plan. That’s an improvement over 2018, however, when those percentages were 85.9% and 48.1%, respectively, and a significant improvement over 2009, when those percentages were 64.6% and 41.9%.

Many respondents noted they were receiving training or that their firm/MGA was investing in succession support. “They are really good with that. If I were to die tomorrow, everyone and everything would be taken care of,” says an advisor with London, Ont.-based Freedom 55 Financial in Ontario.

Still, advisors have varying views on the purpose of succession programs. Some appreciated that their firms would simply buy their books when they retire, paying them out over several years, while others wanted more control and guidance.

“I can turn in the keys tomorrow and they’ll take care of it, but it’s not the best,” says a Sun Life advisor in Atlantic Canada.

“The program to buy the block upon death is way below the industry standard. I would like them to put us in contact with other advisors who are selling their blocks and help facilitate those sales,” says an advisor with Mississauga, Ont.-based IDC Worldsource Insurance Network Inc. (IDC WIN) in Ontario. (IDC WIN president Phil Marsillo says the agency plans to expand its program, wanting all advisors to create plans.)

Also across all agencies, the categories with the weakest performance in the 2019 Report Card were “firm’s support for using social media” (6.7) — similar to last year, when it placed second-last with 6.6 — and “firm’s marketing support for advisor’s practice” (7.2, down from 7.7 in 2018). The latter category’s results represent an about-face compared to 2018, when all but two agencies had improved ratings, and the MGAs in particular were praised for their marketing tools. (See Quality of marketing support drops.)

On a firm-by-firm basis, Mississauga, Ont.-based RBC Life Insurance Co. remained the DSA with the highest IE rating, (8.2) and IDC WIN remained the MGA with the highest IE rating (9.2). IDC WIN was also the top firm in the entire 2019 Report Card, while Toronto-based PPI Management Inc. (the company comprised two parts and was referred to as Toronto-based PPI Advisory and Calgary-based PPI Solutions until last year) was a close second, both among the MGAs and across all firms, with an IE rating of 9.1.

Reflective of the collective MGA results, IDC WIN and PPI were most highly rated for objective product choice and ethics. The firms had above-average overall ratings by advisors of 9.6 and 9.4, respectively, and 100% recommendation rates (the average was 93%).

Although not among the Report Card leaders, Winnipeg-based Great-West Life Assurance Co. (GWL) — the survey’s only PPGA — had the most-improved IE rating year-over-year (up 0.3 to 7.3). It also had the highest number of significantly improved category ratings (12), despite weak spots that included the volatile marketing support category. The advisors surveyed specifically rated GWL’s Wealth and Insurance Solutions Enterprise (WISE) network, through which they work.

The WISE network’s strong showing came as a surprise after its IE rating slumped 0.6 in 2018, following the mid-2017 restructuring of GWL’s advisory channel that resulted in the creation of the WISE network. The move sparked advisor concerns about the company’s long-term strategy.

Now, GWL is consolidating under the Canada Life banner and focusing on offering a streamlined product shelf. Mark Foris, vice president of WISE, says this “single-brand strategy” is part of the company’s bid to “build up our own value offering.” At the same time, he says, GWL has been working on strengthening ties to its WISE advisors over the last 12 months: “The direct relationship that they do have with us [is] very important,” Foris says.

In the midst of this shift, the WISE advisors surveyed for the 2019 Report Card were more optimistic than in 2018 in the following four categories, which all rose by one point or more: “firm’s/MGA’s strategic focus,” “firm’s corporate culture,” “effectiveness in keeping advisors informed” and “receptiveness to advisor feedback.” The overall rating by advisors of the network also improved (to 7.7 from 7.3), as did its recommendation rating (to 86.0% from 77.6%).

Still, while some advisors said “they’re trying” and “they’ve stepped up,” referencing GWL’s effort to clarify and communicate its strategy through its WISE network, others were on the fence.

“We have had meetings where they tell us we [the WISE advisors] are the key people, and then there are changes that point to another direction,” says one advisor in Quebec with GWL’s WISE network. Another GWL advisor in Ontario says, “Strategy? What’s that? They are going in the right direction, but how they are going about it might not be 100%. Change is always difficult.”

The agency that saw the most decline year-over-year was Freedom 55, with performance in seven categories dropping significantly — double that of any other firm in this year’s Report Card. This, too, was a reversal compared to 2018, when the agency’s performance ratings rose significantly in 10 categories and its IE rating inched up. As well, in this year’s Report Card, fewer advisors recommended the firm: 82.0% in 2019 compared to 87.5% in 2018.

Freedom 55’s IE rating rose 0.1 to 7.3, even while the agency saw dips across the board, from “firm’s support for using social media” support down to “firm’s/MGA’s ethics.” Its overall rating by advisors remained the same as in 2018.

In addition to assessing their agencies, advisors were also asked to name the biggest threat to their revenue in the 12 months following the survey. Out of six options, 60.7% chose “regulation.” Similar to the other Report Cards, common explanations included too much paperwork and pressure on compensation, but also included lack of clarity on regulators’ plans.

“This is why I gave up MFDA and IIROC; too many regulations,” says a PPI advisor in Alberta.

An advisor with Sun Life in Ontario says, “I hope the regulators don’t ruin the industry. People need advice [and] our job is extremely difficult, especially when you’re starting out, [when] managing all the changes in regulation.”

How we did it

To measure the sentiment of insurance advisors who work for or through dedicated sales agencies (DSAs), managing general agencies (MGAs) or personal producing general agencies (PPGAs), Investment Executive’s research journalist team interviewed 370 advisors between May 6 and June 14, 2019. For the 2019 Insurance Advisors’ Report Card (IARC), that team included Daniel Calabretta, Maddie Johnson and Surina Nath.

This year’s Report Card included three DSAs, one PPGA and four MGAs. Unlike in previous years, Toronto-based PPI Management Inc. is now being treated as one company, rather than as Toronto-based PPI Advisory and Calgary-based PPI Solutions. All of the firm’s advisors, including the part of the team that serves the high net-worth market (PPI Advisory), rated the firm’s services as one group.

Once again, the advisors were asked different questions based on their firms’ different business models. Those who work for DSAs or the single PPGA were asked to rate six categories unique to those types of firms, while those who process business through MGAs were asked to rate two. In total, DSA and PPGA respondents were asked to rate 34 categories while MGA advisors rated 30 (these totals exclude the IE rating and overall rating by advisors). They provided performance and importance ratings on a scale of zero to 10, with zero meaning “poor” or “unimportant” and 10 meaning “excellent” or “very important.” For the overall rating by advisor, they also rated their firms between zero and 10.

Advisors were also asked to choose the biggest threat to their revenue in the next 12 months out of six options, including “other.”