Distribution (R)evolution: Distribution of Life Insurance Products in an Evolving Canadian Wealth Management Landscape

Transcription

1 Investor Economics is a Strategic Insight business Distribution (R)evolution: Distribution of Life Insurance Products in an Evolving Canadian Wealth Management Landscape Benjamin Reed-Hurwitz June 22nd,

2 Discussion Outline Canada s Distribution Landscape 5-year Retrospective on Life Insurance Sales in Canada 5-year Retrospective on Segregated Fund Sales in Canada Wealth Management Decade Ahead 2

3 The Canadian Distribution Landscape Assets in billions of dollars, December 2016 $79 OSDF Direct Robo-advice $390 Online Brokerage $939 Branch Direct *Total financial wealth includes some assets not aligned to distribution channel. $4.1 TRILLION $515 Branch Advice Branch Delivery $487 Financial Advisor $410 Private Wealth $1,128 Full-service Brokerage Advice 1,500 distributors 140,000 advisors 3

4 The Canadian Insurance Distribution Landscape A Matter of Perspective All 2016 life insurance data is preliminary. 4

5 5-year Retrospective on Life Insurance Sales in Canada 5

6 2016 A Banner Year: But What Will 2017 Bring? Annualized new business premiums in millions All 2016 life insurance data is preliminary. Insurance Advisory Service. 6

7 Life Insurance Premiums by Distributor Type All 2016 life insurance data is preliminary. Insurance Advisory Service. 7

8 5-year Retrospective on Segregated Fund Sales in Canada 8

9 Half Full or Half Empty: Segregated Fund Flows Drying Up Insurance Advisory Service. 9

10 Segregated Fund Gross Sales by Distributor Type All 2016 segregated fund distribution data is preliminary. Insurance Advisory Service. 10

11 Wealth Management Decade Ahead 11

12 The Next Decade in Canada s Household Wealth 12

13 Who Owns Canada s Household Financial Wealth? 13

14 Up, Up and Away! Individually Controlled Retirement Assets Poised for Growth Assets in billions of dollars Group Retirement Savings and Pensions Report, Fall

15 360⁰ View of the Payout Phase Product Continuum: Competition for Retirement Dollars Will Come from the Usual and Unusual Suspects Assets in billions of dollars as at June 2016 *GIC and GIA data consists of only GICs/GIAs with an original term > 1 year **Mutual fund, ETF and segregated fund data consists of only income-oriented fund data. Insurance Advisory Service, September 2015, Exhibit 5. 15

16 Inheritance What s Your Number? 16

17 Hot Spots of Retail Financial Services Regulation Global Regulation. 17

18 Global Approaches to Regulating the Client-Advisor Relationship The U.K. s Financial Conduct Authority (FCA) Retail Distribution Review (RDR) Primary focus of reform Conflict of interest management Disclosure Advisor professionalism Australian Corporations Amendment (Future of Financial Advice) Act 2012 Canadian Securities Administrator (CSA) Client Relationship Model, Phase 2 (CRM2) European Securities and Markets Authority (ESMA) MiFID II U.S. Department of Labor (DOL) Conflict of Interest Final Rule The Netherlands Authority for the Financial Market (AFM) Banning of Banning of commissions and commissions and inducements for inducements for complex financial investment products products Monetary Authority of Singapore (MAS) Financial Advisory Industry Review (FAIR) Panel Global Regulation. 18

19 Financial Conduct Authority (U.K.) Focuses on Fair Treatment of Consumers FCA's expected client outcomes from financial services firms Source: Financial Conduct Authority (FCA), Fair treatment of customers, Updated June Global Regulation. 19

20 Regulatory Discussion in Canada Proceeding on Many Fronts Regulatory changes will shape product shelves and distribution models and practices of dealers and advisors with more to come. Investor Economics Insight January

21 In this Environment Planning Tips Towards Life Event Consideration Insurance Advisory Service, September 2015, Exhibit 3. 21

22 What s in a Fee? Can Your Advisor Explain the Gap? Segregated fund vs. mutual fund fees MER as at December 2015* *Based on a sample of funds 22

23 Lower Cost Guarantees Continuing to Gain Traction Segregated fund gross sales in billions of dollars Insurance Advisory Service. 23

24 Benefits of Using Insurance Products in Life Stage Planning Segregated funds Life insurance Proceeds paid directly to beneficiaries. Bypass estate and probate process. Offers creditor protection available with named beneficiaries. Provides diversified asset class management Objective driven use of insurance products. Funds tax liabilities upon death. Minimizes annual taxes payable on investment growth. Maximizes value of tax estate. Presents strategies for corporations and small and medium-sized enterprises. Insurance Advisory Service April 2016, Exhibit 5. 24

25 The Advisor Responsibility Conundrum Mutual fund universe Insurance universe Advisor Advisor Distributor Distributor Distributor Distributor Mutual fund company Mutual fund company Mutual fund company Insurance carrier Insurance carrier Insurance carrier Insurance carrier Responsibility for advisor oversight Insurance Advisory Service, August

26 Change is Slow Until it Isn t Fee-base a Case in Point 26

27 Fintech Company Launches by Year: Mindshare > Market Share SME and Adjacent Fintech Advisory Service Winter 2016, Exhibit

28 Buying Insurance The Applicant's Perspective Consumer descriptions of the insurance purchase process Source: Society of Actuaries, Product Matters!, October 2013 Issue 87, Life insurance: Bought not sold? by JJ Carroll (Referenced study by Swiss Re and Douglas Maddock). Insurance Advisory Service, October

29 Online Life Insurance Distributors Outside of Canada *Includes firms that have not yet launched publicly. Insurance Advisory Service, October

30 Evolution of the Omnichannel Distribution Network Insurance Advisory Service, July 2015, Exhibit 6. 30

31 Canada s Wealth Management Growing Trends 31

32 strategic-i.com