Tuesday, June 29, 2010

(No.100) Agents comment on the agency system

In my previous two columns I presented some of my views on the past, present and future of the active, selling agency system and some of the factors in its decline: column No. 98 [posted June 19 ]"Anatomically impossible? not in business" and column No. 99 [posted June 24] "Kittens aren't biscuits (more about agency decline)".

RickardsRead.com received a number of interesting and thoughtful responses to the views I had expressed. I have selected excerpts from several of them. As in previous columns presenting excerpts from reader emails, for reasons of privacy I have withheld the email writers' identities unless they wrote in an official capacity. However in order to provide context for the views expressed I have preceded each excerpt with a brief reference to the writer's role or connection to the subject.

Words in italics are mine.


1. from an experienced Canadian career agent:

Timely comments on a subject you are so well equipped to discuss based on both your experience and knowledge of insurance distribution. I was "invited" to attend a regulatory update put on by PPI and the [life insurance] company they recently aligned with, whose name escapes me now.

How disappointing it was to listen to them tell the group of grey-haired brokers about their new and exciting capital needs analysis [software] tool. So, not only are these companies not adding to the pool of real agents who "sell stuff" they provide no [financial] planning support to allow these 'brokers' to do real comprehensive client-needed planning.

What a mess when MGAs [managing general agents] are trying to attract advisors with basic needs analysis software that we on the career side take for granted from our companies.

Oh yes. The regulatory update was that regulators are looking at commission disclosure and we need to be vigilant with them. DUH.

2. from an experienced career system agency manager in Canada:

.... your article [was] bang on the mark, as always.

Too many claiming to be truly in the life insurance industry (by way of licensing) with far too few actually engaged or competent or supported by a well-structured career agency system.

3. from a senior life insurance business insider with a wide variety of experience in the industry both in Canada and outside:

Right on and certainly far from an exaggeration. Selling is the name of the game.

In 2008 the life insurers of Canada reinsured about 77.1% of all life risk written. That was after those of us who know thought 2007's 75% was the watershed year and amounts reinsured would decline. Note that the USA saw the watershed year in 2002 and the amount of reinsured has decreased there from 62% to 33%.

Thus the risk [in Canada] is now resident in three main reinsurers (94% of all reinsured amounts are with Swiss Re, Munich Re and RGA Canada).

So, let me get this right: our "life insurers" are not training well, not recruiting well and not taking risk but getting rid of it well -- so yes they are mere sellers or manufacturers, dependent on perspective.

They are certainly not risk takers, preferring the safety of asset management -- which we all know they do so well!

4. from a highly qualified career agent:

The dark side of active prospecting [for life insurance ] is the 'hard sell'. One sales person I know, a top producer (and one my [agency] manager would like to clone) leaves a prospect's home in 20 minutes if he feels the people will not sign a life insurance contract in that meeting.

Let me digress: the vacuum cleaner sales person is selling a 'stand alone' product. The vacuum cleaner does not have to be integrated with the dishwasher, the fridge, the stove and the laundry appliances. In contrast the insurance sales person is selling a product that MUST be integrated with the client's bank account, tax statement's estate issues, cash flow, registered and non-registered assets, etc. etc.

I'm in agreement with your perspective, if the development of the prospecting life insurance sales person includes training in all disciplines of a client's finances.

On the other hand I'm weary of the accolades poured out on (successful?) life insurance sales people who peddle the product as if it is a stand alone vacuum cleaner. Yes, their sales numbers are high, they have telemarketing and/or prospecting methodology down to a science, but they make my stomach turn.

Teaching people how to be active sales prospectors is one aspect of the life insurance sales cycle. Another skill that must co-exist with prospecting is the ability to analyze in the manner of a CFP professional -- a skill all too often missing from the 'sales heroes' held in high regard by company [agency] managers.

5. from a longtime Canadian career agent:

It is nice to be validated by an "outside voice". However I fear that your voice is just static to the industry.

Sometimes I sit and think about the decline of the "life insurance agent" in favour of the "financial planner". There seems to be an embarrassment to call oneself an insurance agent. The industry talks about "holistic advice" (my company in particular) but the focus is on controlling the money and of course the "affluent client".

Just read any trade magazine; it's all about the "affluent client" and focusing on the best clients in terms of return to the advisor.

What happened to the average Canadian? From my point of view they are great clients. Provide decent service and they stick with you and they don't cancel their business. They also provide multiple generations of new clients. They may be 'small potatoes' with no bragging rights to the companies but they are profitable to them. It's a fact that companies seem to miss.

I cannot tell you how many average families lived in dignity and then retired because a life insurance policy was paid out. I'm prouder of that than the wealth that I helped clients grow.

Perhaps I live in a fool's world or maybe I am just old-fashioned. I am here to serve and serve the client before myself. It's worked out for me.

Thanks for listening and thanks for your voice in the wilderness. Perhaps if the rating agencies and the stock reviewers can be convinced then the [life insurance] companies would take heed. We do need to sell new life insurance. It is the life blood of the industry.

[More reader comments on the agency system will appear in the next column, No.101, on RickardsRead.com]


Alastair Rickard


email: Alastair.Rickard@sympatico.ca

Thursday, June 24, 2010

(No.99) Kittens aren't biscuits (more about agency decline)

In my last column (No. 98: "Anatomically impossible? not in business") I wrote about the decline of the active agency system in Canada on which, in one of its forms, most of the industry depends to sell a core product that does not lend itself to buyer initiative: i.e., individual life insurance.

This column continues those views.


A reality which few people outside the life insurance business understand ( nor do many executives employed within it) is the huge difference affecting the future of life insurance distribution between life insurance companies 'sponsoring' the life insurance licences of people in financial services in return for whatever business they may put their way and companies engaged in selecting, training and developing people new to life insurance selling, people who can actually make their careers as professional advisors in a difficult business.

Also important is this reality: it is a more difficult task to find, select and recruit people who can be successful beyond a few weeks in making the harder sales of client-resistant individual life insurance compared with recruiting asset product sales people whose very important role revolves around selling savings products that most people actually want and recognize that they need. Agents who can succeed in a life insurance sales career have different skills and characteristics from sales people who do not. As the Duke of Wellington once observed: the fact that kittens are born in a kitchen doesn't make them biscuits.

It has proven to be no major hill to climb to have successful dual-licensed life agents make the easier sales of asset products, mutual funds in particular. At one point the Mutual Life/Clarica Life career agency distribution system which Sun Life had acquired was generating 2/3 of the year's net mutual fund sales of CI Financial (the outfit for which Sun Life had traded its own mutual fund business plus Clarica's in return for a 1/3 ownership interest, since sold to the Bank of Nova Scotia).

However people recruited to sell asset products do not constitute the mirror image of this sales equation: trying to get them to make the harder life insurance sales with any sort of quantitative success can be a steep slope indeed. One of the best Canadian illustrations is the Investors Group mutual fund sales force -- an excellent branch office/managerial career agency-type distribution system but one that Investors has never been able to make into a distribution system in which even a significant minority of its advisors make their own life sales in any sort of quantity.

In the Canadian market-place today there are a variety of intermediaries and organizations involved in the sale of financial services products of all kinds. They are commonly referred to as financial advisors or financial planners -- and many are well qualified to provide advice. I note that one sees enthusiasm expressed publicly in certain quarters for the embrace of a fantasy version of the financial services business in this country, i.e., that those who sell products and receive commissions should not be allowed to hold themselves out to the public as financial planners.

As a former board chair of the Financial Planning Standards Council I regard this sort of attitude as unrealistic and too precious by half. Whether, for example, a CFP-qualified financial planner receives directly or indirectly commission income from the sale of financial products does not disqualify that person as an advisor provided the expertise is there and is used to benefit the client. Rather this merely reflects the reality of a market place in which genuine fee-only financial planning remains a boutique segment of the financial services business and, since most Canadians show no inclination to seek out nor willingness to pay for fee-only advice, is likely to remain so.

Were it not for the financial advice being provided to Canadians by tens of thousands of licensed financial services intermediaries there would be a huge shortfall in advisory support as well as in the acquisition of problem-solving financial products.

If today's recruiting or sponsoring life insurance company or agency does little more for the agent new to the business than the equivalent of what was mainly done 50 years ago -- that is, sponsor a licence, hand the new agent a rate book and inform the new agent that he (and agents then were virtually all men) would sink or swim financially based on sales from day one, then the odds against becoming a successful life insurance professional are high indeed.

Agents who sell life insurance make a valuable contribution to their communities and to society. Their market in Canada today is not "saturated" (despite the use of this self-serving codswallop by life company executives seeking camouflage for the latest corporate acquisition and by members of the financial services paparazzi who merely repeat what they don't understand about the distribution of life insurance). In fact the market for individual life insurance in Canada today is not adequately served.

The last time I sat down to do some review and calculations involving life insurance coverage in Canada, I concluded that it was a fairly safe bet that (allowing for ownership of multiple policies on the same life and/or owned by the same person) it is likely that today something approaching 2/3 of Canada's population have little or no individual life insurance coverage, the type of coverage which assures a policy owner both control of the coverage and payment of a benefit at the end of the day.

I have long been a supporter of the active agency system, especially the career agency distribution system, not out of some emotional attachment but because I value the social and economic benefits to society and to individuals of their having adequate individual life insurance coverage. Society as a whole and not merely those in the life insurance business have a direct interest in whether or not Canadians are adequately insured and therefore -- whether they realize it or not -- they also have an interest in its effective distribution to Canadians, i.e., in the provision of genuine 'opportunities to buy'.

Perhaps the hoariest cliche of the North American life insurance business holds that life insurance is not bought, it is sold. But cliches customarily attain their status because they encapsulate a truth. Today's active agency system is involved with the distribution and sale of a product most Canadians will not take the initiative to purchase either at all or in the right amount at the right time.

Finally, an informed understanding of the subject makes it impossible to avoid the conclusion that nothing has weakened the potential growth of the active agency system in Canada as much as the poor stewardship of that distribution system by most of the life insurance companies with which it has been partnered for decades.

[This theme will be continued in the next column, No.100, with the presentation of excerpts from several of the interesting responses to RickardsRead.com by life insurance agents and others to my comments on the decline of the agency system.]

Alastair Rickard


email: Alastair.Rickard@sympatico.ca

Saturday, June 19, 2010

(No.98) Anatomically impossible? Not in business

For longer than I care to remember I have pointed both privately and publicly to the decline of active, prospecting, selling agency systems, and especially to the reduction in the number of life insurance companies recruting, selecting and training real selling life insurance agents, i.e., those who can make significant numbers of the harder sales -- those of individual life insurance policies and do so not for weeks or months but for years.

It has long been the leakage of active selling agents from career agency distribution systems that has been the main source of active life insurance sales people for the 'brokerage system' in Canada (and in the US too), itself a form of agency system to which an increasing number of life insurance companies turned for some or all of their distribution, including even bank-owned players like RBC and most recently BMO in its post-AIG acquisition phase.

I have also emphasized that there is an elephant in the corner of the industry's distribution room: the number of active, prospecting life insurance sales people selling individual life insurance as a core product has been declining for years even as the total number of persons holding life insurance licenses in Canada has significantly increased.

As the result of industry mergers and acquisitions (the preferred method for company managements who find organic growth too challenging), as well as corporate decisions to abandon career agency systems as too difficult to manage, the number of life insurance companies actually involved in recruiting and developing people new to life insurance selling has dwindled. Yet agents who can successfully sell life insurance as a core financial product do not materialize like the ghost of Christmas future. They have to be brought into the business.

For the industry and public alike there has been a direct relationship between the recruiting and development of new people as agents who can sell and the sales volume of individual life insurance. However, as I have suggested in several of the columns I have posted to RickardsRead.com [for example: No.6 "Wellington's horse & agency rat holes"; Nos.17 & 18 "The insurance industry's mental health"], too many career agency systems -- like too many life insurance companies -- were poorly managed for too long. That mismanagement played a major part in causing today's weakened agency distribution in Canada. Why is this important? Because notwithstanding the studied ignorance of certain executives, many consultants and various toads in the life insurance garden, the life insurance business is actually about 'selling stuff'.

As the number of new people coming into the business as genuinely active sellers of life insurance continued to decline, the competition among life insurance companies manufacturing life insurance products (and remember that any company that can pass minimum regulatory requirements can become a product 'manufacturer'), the competition intensified among companies for the attention, affiliation and new business of life insurance sales people already active as sellers of this core product. It was and continues to be a parasitic relationship between companies bringing few or no successful sales people into the business and those who do.

In Canada the leading industry companies involved today in bringing new people into the career agency system on a full time basis are London Life (a fundamental role it has long played) and Sun Life by virtue of it having purchased the Mutual Life/Clarica Life career agency system, one as old and as distinguished in its record as London's -- Sun having previously mismanaged and finally collapsed its own career system in Canada. What continues to be played out is a fierce and expensive competition among life insurance companies for the favour of a declining number of active life insurance intermediaries whose selling skills are also in demand to make the easier sales of other financial products.

The life insurance industry in Canada has in recent years had more than 70,000 persons who hold licences permitting them to sell life insurance (with the bulk of them also holding licences to sell other financial products as well). Indeed thousands of life licences are obtained and renewed solely for the purpose of allowing their holders to split commissions on life sales made by other agents to whom clients have been referred. I estimate that fewer than 25,000 life licensed sales people in Canada could be considered to be active (by any reasonable benchmark) in the selling of individual life insurance policies.

What has so often escaped the understanding of those managing life insurance companies as well as many who regulate their activities plus those of their sales people is the fact that a serious challenge facing the industry does not lie in being able to get large numbers of people licensed to sell life insurance but rather in finding and developing sufficient numbers of people who are capable of making a career based on selling individual life insurance as at least one of several core financial products.

The agency distribution situation has become an unhealthy one in which many life insurance companies, third party agency organizations and producer groups are chasing a declining number of active sellers of this core product. The Canadian industry is not providing for renewal of the active agency system of distribution -- and therefore of effective sales growth going forward .

Like its American and UK cousins the Canadian life insurance industry is, in terms of the future effective agency distribution of a core product, at risk of disappearing up its own rectum.


Alastair Rickard


email: Alastair.Rickard@sympatico.ca

Wednesday, June 9, 2010

(No.97) A national regulator & other emails to RickardsRead

As in previous columns presenting excerpts from reader emails to RickardsRead.com, and for reasons of privacy, I have withheld the email writers' identities unless they wrote in an official capacity. However, in order to provide some context for the views expressed I have preceded each excerpt with a brief reference to the writer's role or connection to the subject.

Words in italics are mine.


Ref. column No. 95 (posted May 30) on RickardsRead.com:
"A national securities regulator: Maybe not"

1. from an advisor to a provincial government:

I share your perplexity with regard to the possible outcome of this saga. The Supreme Court will probably not take a clear cut stand on the issue. Remember its judgement on the right for Quebec to secede.

2. from a former staffer of a provincial securities commission:

I will spare you my reasons for supporting, on balance, a national regulator ....That said, the debate usually draws comparisons with the US but fails to acknowledge that each of the 50 states has its own securities regulator, which generally occupies the front lines in protecting retail investors by responding to local malfeasance. ... And let's not forget that it was state prosecutors, starting with Eliot Spitzer, and not the SEC that accounted for most of the headlines and perp walks involving malfeasance by the stewards of public companies.

There has to be a strong element of local enforcement, backed up by the effective powers to investigate and prosecute white collar crime, especially as it targets retail investors. However, since I do not see Canada sustaining the luxury of parallel provincial and national regulation, I have come down on the side of a national regulator that administers regional enforcement. I am still waiting for evidence of unique local characteristics in the capital markets, apart from the jobs of existing regulators, that justify Alberta's and Quebec's obstruction. ...

Ref. column No. 92 (posted May 16) on RickardsRead:
"Financial executives: more nerve than a canal horse"

3. from a financial advisor active in the life insurance business:

I read and thank you for your latest blog. I'm so glad you take the time to express your thoughts. You are a gifted author.

4. from a person working with a financial services regulator:

I just want you to know that I read your blog all the time. ... By the way, isn't it nice not be censored! You haven't lost your touch.

Ref. column No. 94 (posted May 26) on RickardsRead.com:
"Airport security & political theatre"

5. from a Canadian frequent flyer:

You are right in your commentary. "Form without substance" is what the process has become for the travelling public. Underpaid, untrained and uninterested entrants into the labour market examining and re-examining your boarding pass and passport photo (no smiling allowed).

6. from an American frequent flyer:

I agree with you that security is mostly a charade. The real danger is in cargo where much larger explosives can be hidden.

7. from a Canadian business traveller:

I've often observed the same thing. The government only does something if there's a visibility involved. Security has to be the most difficult job. You have to go through the motions knowing that the need is really very remote.

Ref. column No. 90 (posted May 2) on RickardsRead.com:
"Banks, stability & insurance: the silly & the wise"

8. from a senior executive in a Canadian life insurance company:

Great insight on who should get the credit for the stability of the Canadian financial system.

9. from a senior executive in an American life insurance company:

Great article -- as usual.

Ref. column No. 91 (posted May 6) on RickardsRead.com:
"Escaping dross & drek with The Pallisers"

10. from a regional manager for a Canadian life insurance company:

Awesome, direct -- true!!

11. from Chad Campbell, Acorn Media, NY, distributors of "The Pallisers" DVD set:

Thanks a lot. We really appreciate your recommendation.

Ref. column No. 93 (posted May 21) on RickardsRead.com:
" Raquel Welch & Clare Boothe Luce"

12. from a former financial services executive:

Your last couple of reviews will be the catalyst to get us to Niagara for a weekend of theatre. Can't wait to compare our experience with your insights.

13. from an executive employed by a non-profit institution:

I really appreciate how you and Pat add to my culture while I focus on surviving my hectic schedule. You have no idea how much I enjoy your travel and theatre reviews. Thanks. Keep them coming.

Ref. column No. 87 (posted April 12) on RickardsRead.com:
"Teddy boys & SS costumes"

14. from Susan Ferley, Artistic Director of The Grand Theatre, London, Ontario:

I am delighted you had an opportunity to see The Grand Theatre's production of "Pride and Prejudice". Your positive comments are very much appreciated. It was a strong company -- strong individual performances and great work as an ensemble. How lovely to have The Grand Theatre included with the Shaw Festival in your discussion! And the inclusion of the web address was appreciated too.

Ref. column No. 89 (posted April 25) on RickardsRead.com:
"Maud Lewis & Nena Sanchez, Nova Scotia & Curacao"

15. from a reader of RickardsRead.com:

I was not familiar with either artist and very much enjoyed the links to their respective work. Your summary captures the vibrant nature of these two fine painters.

16. from Ray Cronin, Director & CEO, Art Gallery of Nova Scotia, Halifax:

Thanks for this. I enjoyed reading your comments.


Alastair Rickard


email: Alastair.Rickard@sympatico.ca

Thursday, June 3, 2010

(No.96) Critics duelling over "An Ideal Husband"

I have always been interested and frequently amused by the divergence of critics' opinions of the same movies, plays or television programs. One sometimes wonders if they have actually watched the same thing. In the age of the internet anyone can be an arts critic -- and many are. I am an example of this populist, some would say pernicious reality. Sadly it has contributed to a trend which has seen arts critics being dropped from various newspapers in the cause of budget reduction.

Some newspapers pride themselves on having staff critics known for being tough in their criticism. The New York Times employs a group arts critics who regularly review in superior prose what they regard as inferior or (occasionally) superior or merely mediocre. Moreover, and I treasure this resistance to pop trends, the New York Times refuses to join the common practise of ratings plays, movies et al by assigning stars; the critics' reviews constitute the Times' ratings.

All of this is by way of preamble to a recent example of diverging opinions by three Toronto newspaper theatre critics: J. Kelly Nestruck of the Globe and Mail, Richard Ouzounian of the Star and Robert Cushman of the National Post.

Column No. 87 on RickardsRead.com ("Teddy boys & SS costumes") included three theatrical reviews including the Shaw Festival's production for this season of Oscar Wilde's "An Ideal Husband". Pat and I saw one of its preview performances in April. Nestruck, Ouzounian and Cushman saw the play more recently once it had its formal opening.

Their reviews can be read in full on the newspapers' websites: Nestruck did an initial 'immediate' review (May 27) and then a second (May 28 ); Ouzounian's review appeared May 28 and Cushman's on May 29. Nestruck gave "An Ideal Husband" 2 stars while Ouzounian awarded the play 3 1/2 (out of 4). Cushman does not rate plays by assigning stars.

The Globe critic saw the Shaw presentation of the Wilde play as "mostly disappointing", one in which "Wilde's wit withers in ...(an) uneven production ... too often dry and dull or overwrought". The Star's theatre critic on the other hand saw the same play as "admirably acted, dazzingly designed and smartly staged", a production that is "superbly accomplished, highly entertaining and intellectually rewarding". The National Post's reviewer was less enthusiastic about "The Ideal Husband" than the Star's, viewing the production as having "both wit and passion, though it delivers them in imperfect quantities".

In terms of the critics' respective reactions to details of the play's staging, they also reacted rather differently to (for example) the play's set design, lighting and costumes.

-- Ouzounian declared that the "multi-pillared set lets us know we're in a morality play, not a drawing room comedy. ... (the) daringly operatic lighting treats every entrance and exit as the stuff of high drama".

-- Contrast this with Nestruck's reaction: he refers to a "poorly designed, double-decker set. An awkward industrial obstacle course of railings and poles, the ugly set looks like an unpopular dance club and lit like a dungeon". In terms of the costumes he thought that they were "curious ... (and) simply distract from the action".

-- As with his assessment of the play overall Cushman fell somewhere between his two fellow critics: he described the drawing room set as "a vast balustraded whispering gallery which seems apt in a play that largely hinges on gossip" while he thought the costumes "are, well, eclectically creative".

-- In our comments in column No.87 on RickardsRead.com we had said that the "two level set is all modern pillars, stairs and iron railings (it looked to me like the anteroom of a second tier Las Vegas casino) ... a few costumes [were] irritatingly inappropriate to the period ... it produced the same reaction as I have had to the stage affectation of dressing up Shakespearean actors as Teddy Boys or SS officers".

In terms of an assessment of the Shaw Festival's production of "An Ideal Husband": as a matter of audience enjoyment Pat and I are more positive about it than was Nestruck of the Globe, rather less enthusiastic than Ouzounian of the Star and perhaps closest in our view to the 'middle' position of Cushman.

Pat and I repeat our earlier judgement (posted April 12): the play is "worth seeing and overall [is] an entertaining presentation".


Information about the 10 plays (including "An Ideal Husband") being presented this season by the Shaw Festival in Niagara-on-the-Lake can be seen at www.Shawfest.com


Alastair Rickard


email: Alastair.Rickard@sympatico.ca