Canada’s largest insurers are happy to sell insurance through independent advisors, but what they really want to do is help those advisors manage their clients’ assets.
Directors of the largest Canadian insurers present at the Scotia Capital Financials Summit in Toronto emphasized that wealth management, not insurance, has become their most important source of income.
“Wealth management has grown from 20% to 40% of our earnings over the last five years,” J. Roy Firth, Manulife’s executive vice president and head of its Canadian wealth management division, said at the conference. “Insurance has gone from 69% to 41%, and it could very well go down to about 25%.”
In the retail wealth management space, Manulife’s revenue comes from three distinct divisions – Manulife Investments, Manulife Bank and its distribution business through Manulife Securities and recently acquired Berkshire.
The basis of this model is an independent network of advisors. Firth says Manulife must rely on financial advisors to move the product. Instead of following the example of banks that sell their products directly to investors, the insurer specifically designed Manulife Bank to serve independent advisors.
“All our products are sold through intermediaries, so we want to have an independent marketplace for banking advice,” says Firth.
Manulife’s performance on the product side improved. According to the Canadian Mutual Fund Institute, Manulife is currently the 10th largest mutual fund company in Canada, with fund assets of approximately $30.0 billion. However, standard mutual funds are only worth $9.4 billion because $20.6 billion of that total is in segregated funds.
Firth says segmented funds and guaranteed minimum distribution products provide a gateway to greater market share in standard funds. Demand for insured investment products that only insurers can offer is growing as they meet the unique investment needs of affluent baby boomers approaching retirement who need to protect and grow their investments.
Insurers are using their success in selling segment fund products and variable annuities to build brand recognition on the mutual fund side. For this reason, he says, Manulife recently discontinued the Elliot and Page mutual fund brand and all of the company’s investment products now carry the Manulife brand.
Perhaps the most drastic change for an insurer is combining its own advisor distribution networks. Through Berkshire, Manulife added $12.5 billion in advisor-administered assets to the $7 billion in existing assets it controls through Manulife Securities.
Firth confirmed there are no plans to turn Berkshire into an in-house sales force, but some of Berkshire’s 235 branches will be staffed by Manulife’s in-house banking consultants.
Manulife’s main competitor, Sun Life, also places a much greater emphasis on individual wealth management.
Also speaking at the conference, Donald A. Stewart, CEO of Sun Life Financial, said that over the past 12 months, 60% of the company’s revenue came from wealth management. Internationally, the company currently manages over $60 billion in trading assets.
In Canada, much of Sun Life’s sales come from switching customers leaving group retirement plans to retail products, and 71% of the company’s U.S. revenue now comes from annuities.
However, unlike Manulife, Sun Life says it will try to use its internal sales force to increase product sales, something it has made clear by dropping the Clarica name in favor of the Sun Life brand.
Sun Life also owns 36.5% of shares in CI Financial Income Fund, which controls one of the largest investment fund companies in the country, CI Investments, and is the owner of the consulting company Assante.
Submitted by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com
(09/12/07)
