Advocis - Ottawa May 22, Our Industry: The Changes, The Opportunities. Jim Virtue, CA, CFP, CLU President and CEO PPI Solutions

Transcription

1 Advocis - Ottawa May 22, 2014 Our Industry: The Changes, The Opportunities. Jim Virtue, CA, CFP, CLU President and CEO PPI Solutions

2 Today s presentation 30 years of change in insurance distribution and financial services Current industry pressures What the future holds Why this matters to you How to equip your practice to thrive

3 30 years of financial services 30 years ago Banking Insurance Trust Companies Securities Brokerage Firms

4 30 years of financial services Today Banking Insurance Trust Companies Securities Brokerage Firms

5 30 years of financial services Today Banking Banking Insurance

6 30 years of financial services From 4 perspectives 1. Insurance Companies 2. MGAs 3. Advisors 4. Technology

7 1. Insurance companies through the years 20 years ago No insurance company controlled more than 10% of the market 100+ insurance companies operating in Canada 1980 s 1990 s 2000 s 2010 s 2014

8 1. Insurance companies through the years Today Consolidation has changed the landscape! 1980 s 1990 s 2000 s 2010 s 2014

9 1. Insurance company consolidation Major transactions 1988 Westbury buys Canadian General Insurance 1989 Aetna buys Excelsior Life

10 1. Insurance company consolidation A different perspective Now Manulife part of GreatNow Westpart LifeofGroup RBC NowInsurance part of Aetna Crown Life Westbury Life Financial Life Canada Life Royal Sun Alliance London Life Canadian General Insurance Gerling Global New York Life UNUM Maritime Life CNA Provident John Hancock (US) Great West Life Paul Revere Zurich Life Voyageur North American Life Mutual of Omaha Commercial Union Prudential of America (Canada) Confederation Life Excelsior Life

11 1. Insurance company consolidation Impact on production today Individual Life Market Share: Top 4 companies = 71% Top 10 companies = 93% Individual Critical Illness Sales: Top 4 companies = 79% Top 10 companies = 98% Segregated Funds: Top 4 companies = 74% Top 10 companies = 99%

12 1. Insurance companies with Career distributions 25 years ago New York Life Canada Life Manulife Mutual Life Metropolitan Life Great West Life Prudential London Life Standard Life Equitable Life Prudential of England North American Life Sun Life Canadian Foresters Lutheran Life Laurentian/Desjardins Imperial Life Monarch Life Pioneer Life

13 1. Insurance companies with Career distributions Today New York Life Canada Life Manulife Mutual Life Metropolitan Life Great West Life Prudential London Life Standard Life Equitable Life Prudential of England North American Life Sun Life Canadian Foresters Lutheran Life Laurentian/Desjardins Desjardins Imperial Life Monarch Life Pioneer Life RBC Insurance

14 1. Insurance companies: De-Mutualization 20 years ago All major companies are mutual Canada Life Manulife New York Life London Life Sun Life Today Equitable Life the only one of top 10 producing companies market share is less than 5%

15 2. MGAs through the years Amount of written business written and MGA characteristics changed 1980 s 1990 s 2000 s 2010 s 2014

16 2. MGAs through the years 30 years ago MGA business in its infancy All MGAs regional, and relatively few in number Most MGAs have 1 to 3 contracts 1980 s 1990 s 2000 s 2010 s 2014

17 2. MGAs through the years Transition Insurance companies: Career to MGA Many branch managers become 1st MGAs Some consolidation amongst MGAs 1980 s 1990 s 2000 s 2010 s 2014

18 2. MGAs through the years Today Larger MGAs established 3 large <10 regional 200+ local MGA channel accounts for >50% of written business 1980 s 1990 s 2000 s 2010 s 2014

19 2. MGA Consolidation: Evolution of PPI Solutions MGAs that combined to form PPI Solutions over 10 years Pinnacle Brokerage Ltd. (Vancouver) Woodman Financial Group Inc. (Calgary)

20

21 3. Advisors through the years 30 years ago Almost all Advisors are with a Career Company 1980 s 1990 s 2000 s 2010 s 2014

22 3. Advisors through the years Today Average age of Advisors is over 57 Career system not bringing in as many advisors as before and retaining the ones they bring in MGA/Broker channel has not been able to develop new advisors Succession is a huge issue in MGA Channel 1980 s 1990 s 2000 s 2010 s 2014

23 3. Advisors: What changed? In the career system advisors received support: Illustrations Admin Marketing and Sales Practice Management Financial Insurance companies stopped providing these services MGAs can fill the void ONLY IF they are equipped and financed to provide required support (many are not)

24 4. Technology through the years Internet radically changed consumer expectations about turnaround time and access to information Technology makes comparison of products and pricing easier and faster BUT due to insurance contract timeframes (i.e. lifetime) and many years of consolidating, insurance companies face challenges to upgrade systems 1980 s 1990 s 2000 s 2010 s 2014

25 Summary: Insurance distribution changes Unprecedented changes in: Method of distribution (shift from career to broker/mga, mutual to stock) Fewer companies in the marketplace Enabling technologies (easier to compare) Decreasing number of advisors and increasing age Emergence of MGAs as the largest distributor channel Increase in Direct Sales Regulatory environment

26 Current industry pressures

27 Current pressures: Regulatory Issues Changes to MGA Compliance Commission disclosure Embedded Commissions Fiduciary Duty CRM 2 Fintrac Ontario Bill 157

28 Current pressures: Regulatory Canadian Council of Insurance Regulators reviewing MGAs What is this entity? What do they do? How do they interact with consumers? Do they need regulation to protect consumers?

29 Current pressures: Regulatory Provincial Regulators reviewing MGA business Looking at sales practices, disclosure, potential conflicts and compensation Market Conduct audits required by all Carriers

30 Current pressures: Regulatory Worldwide regulation - disclosure and commission UK Australia US Where Canada is today on the disclosure issue

31 Current pressures: Regulatory Embedded Compensation Canadian regulators following international trends Embedded commissions in investments products banned in U.K. and Australia Canadian regulators discussing banning embedded commission in funds

32 Current pressures: Regulatory CRM 2 Started in July 2013 Phased in over 3 years

33 Current pressures: Regulatory Fiduciary duty under consideration for financial advisors Fiduciary duty is the highest standard of care in law It is a duty to act, first and foremost, in another person s best interest, without regard to one s own Professionals who are traditionally recognized as fiduciaries include lawyers, doctors and trustees

34 Current pressures: Regulatory New Fintrac and AML rules coming All Financial Institutions being viewed the same Require ongoing monitoring not just point of sale

35 Current pressures: Regulatory Ontario Bill 157 Bill recently introduced in Ontario to regulate financial planning Three key elements: 1. Advisors holding themselves out as planners must be registered with self regulatory body 2. A single system for complaints and discipline 3. A one stop reference check

36 Current pressures: Insurance Companies Stock (vs. Mutual) companies are motivated by profit Insurance companies pushing regulatory duties and supervision to MGAs Companies auditing MGAs and advisors for compliance Intense price competition among insurers creates cost/product pressures Prefer distribution costs to be variable Product re-pricing (possible withdrawals)

37 Current pressures: Competition Insurance and financial planning historically offered through insurance brokers Now increased competition from: Banks (retirement planning ads) Securities Firms (mostly owned by banks) Insurance company direct channels

38 Current pressures: Economic Low interest rates International Accounting Standards 2008 crash and enhanced regulatory sales scrutiny Results of these factors? Price increase on LCOI Some companies to withdraw from market Term policies continue to be very price competitive

39 What the future holds

40 Evolution towards the future Regulatory environment More regulation and more public scrutiny

41 Evolution towards the future Insurance companies Possible further consolidation Price pressures on term will continue LCOI products in state of flux with continued price increases, product withdrawals or adjustable products New products will be designed Guaranteed products have uncertain future

42 Evolution towards the future Distribution Continued growth of MGA network Changes in what MGAs do and how they interact with advisors A renewal of the career system?

43 What does this all mean to you?

44 Through change comes opportunity. It is a great time to re-evaluate your business and ensure that you are doing the right things with the right people.

45 How to equip your practice to thrive

46 Building your practice Evaluate your practice to ensure that you are able to best serve your clients

47 Five steps to building your practice Review your client base and ask yourself: 1. Do I meet regularly with each of my insurance clients? 2. Do I have a compliant file to back up my recommendations? 3. Do all of the clients I have reflect my ideal client? 4. Do I have access to resources and knowledge? 5. Do I have the correct distribution partners?

48 Five steps to building your practice 1. Client meetings Meet annually with clients to ensure their needs are met and new opportunities are identified

49 Five steps to building your practice 2. A compliant client file includes Disclosure Statement Engagement Letter Client s pertinent financial details so you can assess the amount and type of insurance Details of insurance in-force A record of your analysis that assessed previously existing insurance

50 Five steps to building your practice 3. Decide who is your ideal client Take the time to think about it Write it down Direct your prospecting towards these people Go through your clients and find the ones that fit Consider selling part of your book to another advisor to allow you to focus on the clients most appropriate to your business model

51 Five steps to building your practice 4. Your resources and knowledge Tax and Estate Expertise Ensure you have a good network of professional advisors to work with

52 Five steps to building your practice 4. Your resources and knowledge Sales presentations Ensure they are compliant and correctly calculate present values and other data

53 Five steps to building your practice 4. Your resources and knowledge Take your continuing education seriously Obtain industry designation CFP, CLU, RHU, etc. Join Advocis Check out courses offered through your MGA

54 Five steps to building your practice 5. What to look for in a distribution partner? SUPPORT Sales and Marketing Productivity Tax and Technical Support Product Development Financial Planning Tools Technology Support Compliance

55 Five steps to building your practice 5. What to look for in a distribution partner? COMPLIANCE Keep you informed with relevant, timely updates Provide easy to use tools that keep your practice compliant and save you time

56 Your future is bright Need for quality, professional financial advisors will continue to grow as: Population ages Fewer employees have pension plans Products became more complex Independence will continue to matter!

57 Advocis - Ottawa May 22, 2014 Thank you