Saturday, February 16, 2013

(No.230) Sun Life vs CI Financial: "it could get messy"

"Sun Life of Canada vs C.I. Financial: add in Sun Life's career agents and it could get messy"

by Alastair Rickard

In a recent column entitled "Sun Life: dumping a can of worms" ( No.225, posted Jan.19, 2013) I referred to the relationship between Sun Life Financial in Canada and the mutual fund firm CI Financial. Sun Life owned an approximately 1/3 interest in CI which it sold to the Bank of Nova Scotia.

I suggested that in order to gain an understanding of how the important continuing mutual fund sales relationships between many of Sun Life's career agents and CI were built (with Sun Life's co-operation and encouragement) readers should peruse the response -- disagreeing with an earlier column of mine -- from a CI-supporting Sun Life career agent who is successful in the mutual fund business (see, column No. 154 posted May 30, 2011.)

That same Sun Life career agent has responded to my Jan.19, 2013 column about Sun Life with some further interesting comments about Sun Life advisors and CI, particularly vis-a-vis Sun's desire to regain mutual fund business from its own agents.

"My feelings and loyalty toward CI have not changed since May, 2011", he wrote, "nor, do I sense, have the feelings of many of my peers. It may be [Sun Life Canadian president] Kevin Dougherty's perception that this new mutual fund company [Sun Life Global Investments] is in the best interest of shareholders but at this time it is NOT in the best interest of Advisors (and, by extension, their clients).

"I recently saw a chart chronicling the growth of Sun Life advisors' wealth books of business. The growth over the 5 years from 2007 to 2012 (which includes the 'fiscal crisis') was phenomenal!

"The number of advisors [i.e., Sun Life career agents] who manage books of over $10 million [of mutual funds] has almost doubled from about 250 to 480 advisors and the number of advisors who manage over $50 million has more than tripled from 6 to 22. The credit for this may not totally belong to the people at CI but they have certainly been great partners to advisors and great stewards of the money entrusted to them by clients.

"It takes more than some good funds to make a good (or great) mutual fund company. Sun Life's ability to support me and my business in an effective and efficient manner is light years behind that of CI. With no malice intended, comparing Sun Life Global Investments to CI at this stage is like comparing my golf game to that of Tiger Woods (trust me I am a very bad golfer).

"As you likely know a contract exists between CI and Sun Life outlining their business relationship. I, and many of my friends, are concerned with where Sun Life senior management goes with their relationship once that contract is terminated. I sense that Kevin D. would tear it up tomorrow if he could, but instead he will likely wait until the end of 2013 , which is the earliest opportunity he can terminate the agreement (by providing 12 months notice). You likely also know that the agreement is a public document found on CI's SEDAR site.

"I predict the fur will really begin to fly in 2014 or 2015 when Sun must reveal their hand to their advisors. To what lengths will Sun go to create a more advantageous playing field for their proprietary funds?  How much will they upset their senior advisors, who are happy with the status quo. in an attempt to gain more market share? Only time will tell but it could get messy." [end of Sun Life agent's comments]

The foregoing views of a Sun Life career agent of long experience and considerable mutual fund sales success should be regarded seriously not only as informed opinion but also as solidly indicative of the attitudes of many (if not most) of the most experienced and successful Sun agents in terms of the mutual fund sales by the members of the Sun Life sales force.

As I have indicated in previous RickardsRead columns, I made it part of my Sun Life role as, inter alia, an agency system advocate to be critical of the negative aspects of the Sun/CI distribution relationship. In particular I disliked the preferred access at too low cost it gave CI to the large, national, proprietary, high quality and successful career agency distribution system which Sun had acquired when it bought Clarica Life (the demutualized Mutual Life of Canada).

It was valuable access to effective distribution generating higher quality business (retention) than other distribtuion sources CI had. I recall one year early in the Sun/CI relationship in which well above half of CI's net new business came from the Mutual/Clarica/Sun Life career agency system.

The Mutual/Clarica career agency system replaced the inferior 'brokerage' system with which Sun in Canada had replaced its own mediocre (because of Sun management) career agency system. The Sun agency distribution system at the time of the Clarica purchase was already a distribution system not only insufficient (based largely on under-priced and overly compensated universal life product) in the Canadian market place but one that was in decline.

However the fact is that Sun Life's senior management having wisely acquired a superior career agency distribution system, then -- whether as the result of uninformed decision-making or incompetence --  handicapped future Canadian sales with its arrangemnt with CI. Today that back story is neither here nor there to the many Sun Life career agents whose loyalty in terms of mutual fund product and sales has been earned by CI and who regard CI as superior in product and agent support to Sun's own more recently created SGLI.

One can safely conclude, for example, that a significant chunk of the 41% Q4 2012 increase in mutual fund sales by Sun Life's career agency sales force in Canada went to CI whose net sales in Q4 of 1012 increased 9%.

In my view the Sun Life agent who wrote to me is correct in his conclusion: "it could get messy".



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