Companies are exiting complete product lines. MGAs are merging into the sort of monoliths they were invented to replace. Advisors are floundering.

But, all is not lost. Through these challenges, there is a business model that alleviates the pressure and gets you back in the business with a flourish. Courage is the ability to take bold action despite insecurity and uncertainty. You need it more today than ever.

A model that works is “Financial Team Leader”. I use this name rather than specialist because while specialists are busy and relatively unaffected by outside calamity, many people just can’t see their way to concentrate their business that much. Here’s another way to look at the role.

The most important decision you ever make in business is deciding with whom exactly you have the most natural influence and then working with them. These people naturally take your advice. They look to you for answers. When you call, they answer. You know them. They know you.

This is your natural audience and it’s the most important part of your business. If you pitch to the wrong people, you’ll never win. So, you may have to reposition yourself to only part of your current market but this is a critical first step.

Next, pick just one of the services or products you sell today. It has to be what you love to do most, are very good at and pays off well for you. You need all three. When you love your work you are naturally passionate and energized. That’s the excitement you want. Make this service your number one pitch to your natural audience. People will only ever know you for one thing anyway. You decide what that is. Remember your early career excitement? This is the same.

Any other related services are “provided as a service to your clients”, not the main pitch. You have to go in with only one “flag”. Hold it high.

Other services are best handled by a team. Lead a team of people over time. Don’t worry about finding them first. Get good and they’ll find you. And, ignore that talk that you have to offer everything or you can be sued. You do not. You can and must contract with clients to do what you do best. Do it with your Relationship Engagement Document.

Now, you have a favourite role with your favourite people. Start by calling your existing natural audience clients first. Reintroduce yourself and your new focus to them. Do a super job. You get new business by doing a great job with old business. Demonstrate your new passion and excitement.

Stick to this hybrid business model and you’re back.

What’s the best way to get started with some serious promotion?
Newspapers and Yellow Pages were once all we really had. Today, they might be the last places you spend your money. We now have so many low cost opportunities to get the word out that it can be overwhelming. Here are a few low cost ideas to get you going.

I like the idea of low cost to start because the only way you ever really know what works is to test it out. Low cost tests are good research. High cost tests can be dangerous if they fail. Still, you need to understand the nature of promotion.

First, promotion is a never-ending job. You can never stop promoting yourself. I’m reminded of the Guinness beer story in Ireland. They once stopped advertising in their home country because they thought they had the market cornered. Sales slid substantially immediately. Imagine, Guinness, in Ireland. So, it can happen to anyone regardless of how well known. If you stop promoting, the sense is you’ve stopped selling.

Second, keep your story simple and consistent. Complicated stories are not absorbed. They have minimal impact. Position yourself as something specific for some special people – what I call your expert identity. You can’t be the everything for everybody guy.

And, keep telling your story. Don’t worry about being repetitive. You need to be. When you get sick and tired of your message is about the time your audience is just starting to get it. This is why so much advisor advertising looks like it fails. It hasn’t. It just hasn’t had all the time it needs to work. You have to keep your same story selling for you every day to build momentum.

Tell your story everywhere you can for free first. Do you have a good story on LinkedIn.com? Have you connected with every possible prospect you can think of there? Many advisors are just connected to other advisors. Friendly, but foolish. They aren’t buying from you.

When connected to prospects, COIs and clients, you can build your reputation and keep top of mind. This is real prospecting in today’s world. It sure beats sitting around the office wondering whom to call.

Do you tweet? Think Twitter’s useless? It is if all you do is a play by play of your boring life. But, if you keep passing along great practical advice, you can make yourself well known for what you know. It’s a micro-blog – telling potent short stories that help people. And, don’t self-promote. If you’re just commercial, people tune you out. Check me out @JimRuta to see what I mean. You can even re-tweet my stuff to start.

The powerful part of tweeting is that you can now write something on Twitter and it automatically shows up on Facebook and LinkedIn. One effort with three results.

Be sure you have good profiles on social media as it is the best foundation for all the other promotion you do. Start today if you haven’t already. Be sure to let everyone know that you are on social media. Start with your email signature.

With that foundation and understanding of your value, you can expand to press releases on issues in the news, direct mail to open doors and some advertising to get your name out.

Niche players Sentry and Beutel Goodman were the growth champions, with soaring sales of 27.8% and 24.5% respectively. HSBC Global Asset Management also grew robustly, with sales surging by 17.2%.

RBC Global Asset Management remains the mutual fund leader in Canada, with a 13.6% share and assets of $109.9 billion. TD Asset Management lags far behind with an 8.5% share and assets under management of $68.9 billion.

The Power Financial subsidiaries report their figures separately. Investors Group ranks third with $57.7 billion, and Mackenzie Financial holds seventh position with $39 billion.

CIBC Mutual Funds, Fidelity Investments and BMO Financial Group fill the fourth, fifth and sixth place slots, with assets under management of $52 billion, $51.5 billion and $41.9 billion respectively.

Net mutual fund sales stood at $2.64 billion in January, the Investment Funds Institute of Canada reports. Long-term funds generated spectacular net sales of $3.55 billion. Conversely, money market funds underperformed with net withdrawals of $910.7 million. Under an agreement signed on Aug. 15, 2011, IFIC now bases its studies on Investor Economics statistics.

In talking with Cary List, however, the president and CEO softens that stance just a little, saying that firms and advisors who are serious about professionalism, whether they’re CFP holders or not, need to promote that professionalism in a way that’s consistent and recognizable. “It’s only going to get through to consumers or to Canadians when the message is coming from all sides. We need to get the planners and the firms sending the same message,” he says. “Of course we’re going to promote the CFP, that’s what we’re about. But I think the message is much broader than that.”

He adds that planners and firms don’t need to drastically change their marketing or communication efforts, more that “they need to be aligned in messaging.”

“It’s a fundamental part of our mandate to raise awareness about the importance of financial planning but we have limited resources to send out a message. We can only do so much.”

Getting that message to take hold is a challenge as well. Notably, the FPSC’s 10 Tips for Choosing a Planner and Questions to Ask A Planner, are both documents which have been picked up, distributed and repeated in a wide range of material online, in print and across the blogosphere. Business models have even been built around the concept. At the consumer level though, this promotion doesn’t appear to have a lot of traction.

“I think the problem is that we get down to a fundamental set of behavior issues,” says Mr. List. “People want to trust people. People will naturally take the easy route or they will shy away from the difficult questions. I’m glad we still have a world where trust is the norm. For the most part people can be trusted but when it comes to your own personal well being, it’s not enough.”

In the hopes of shocking or at least surprising a few Canadians into paying attention, the FPSC commissioned the Strategic Council to survey a panel of Canadians to determine how much people generally knew about planner credentials and regulation. The research is a side project to the FPSC’s larger, five-year effort to measure the value of financial planning.

The research found that half of those surveyed thought all financial advisors were held to account by an oversight body that requires they provide ethical and competent service. Moreover, 70 per cent said they thought individuals needed to be licensed in order to call themselves a financial planner.

“Consumers are fairly well protected if you look at medicine, law, even in architecture, there are protections in law, title protection, which doesn’t allow people without appropriate qualifications and professional oversight to practice.”

He adds that getting the same recognition for financial industry professions is a long-term process. “We’re not expecting that tomorrow. There’s not going got be a private members bill and the government of the day (isn’t) going to actually introduce a bill protecting the financial planner title, but I think we need to hit it from all sides and keep hammering home the importance and the need for governments to better protect consumers. We also need to remind consumers that it’s not a regulated activity – you need to do your due diligence – we need to get as many people as possible sending the same message.”

Part of the urgency, he says, comes from the increased consumer demand for a planner’s services. Mr. List says consumers are beginning to recognize that they don’t fully understand the implications of the decisions they make, which is driving many to turn to advisors and planners for help. Many of these would-be clients, he says, have an unrealistic expectation that regulators and laws are looking after their interest in this respect.

“I think, at the very least, if we recognize that Canadians don’t have financial literacy, the easier part to get is hiring literacy – to understand what’s out there.”

But unless their clients make their philanthropic intentions known, many advisors are reluctant to bring up the subject. In 2010, Mackenzie Financial conducted a Canadian survey to see how charitable giving fit into financial advisors’ practices. It found that most advisors who were polled were not raising the issue with their clients.

“The primary reason for this is that many advisors don’t have a strong comfort level with the technical issues – the tax considerations, the most appropriate gifting vehicles or the time of life that’s best for giving,” said Brad Offman, vice-president, strategic philanthropy at Mackenzie Financial in Toronto.

Canadians, he added, have an obligation to support the well-being of our society. “We can choose to do this in the form of paying taxes to the Canada Revenue Agency. Or we can do it through charitable giving and, in return, receive a tax break.”

Planned giving can be an important pillar of an effective financial plan, and advisors should find out how important supporting charities and social and environmental causes, is to clients. “What causes do they want to support?” Ms. Van Cauwenberghe said. “How much control do they want to exercise over their gifting. Do they want to support a lot of causes or take a more focused approach?”

Advisors will find that most donors don’t identify tax savings as the major drive behind their giving, Mr. Offman added. “Conversations with clients will be more about the client’s values than money. Leaving a legacy is an important part of charitable giving.”

Many details need to be considered to ensure that clients get the most from their charitable gifts. Advisors may require extra training in the tax implications of charitable donations, or they may need to build a network of professionals, such as accountants and lawyers, to whom they can refer clients. They should also make themselves knowledgeable about different gifting options such as donor-advised funds, which offer investors many of the advantages of private charitable foundations – tax benefits and control over their giving – at considerably less cost than establishing and maintaining a typical private foundation.

Mr. Offman noted some tax issues around charitable giving with which advisors and their clients should be familiar.
- For clients who want to make annual donations, many need to be reminded that they can donate up to 75% of their incomes for the year in order to receive a tax credit. “If donations have exceeded this amount, they can carry them forward for up to five years,” he said.
- “And in the year of death, donations of up to 100% of the deceased’s net income can be claimed on the terminal tax return. If donations exceed this amount, the estate can carry the donations back to the tax return of the year before the client’s death, and it would again be deductible up to 100% of net income for that year.”
- In 2006, the federal government eliminated capital gains tax on publicly traded securities that were donated to registered Canadian charities. “They must be donated in kind – by transferring the actual shares to the charity,” Mr. Offman said. “The client pays no tax on the capital gains and receives a receipt for the full fair market value of the securities.”

Life insurance is a gifting vehicle that is often overlooked. “With changing family structures, clients may have a lot of people – spouses, children, step-children, common-law partners and their children – who will want a piece of their estates,” Ms. Van Cauwenberghe said. “These clients may be concerned that bequests to charitable organizations in their wills will be subject to challenges from these people. Or clients may be concerned about being pressured to change their wills when they grow frailer. An insurance policy, with a charity as the designated beneficiary, may be the answer in these situations.”

“And if the client donates a life insurance policy to a registered charity,” Mr. Offman added, “he can choose whether to take the tax benefit during his lifetime or after his death. If he chooses to take it during his lifetime, he will have to transfer ownership of the policy to the charity and will immediately receive a receipt for the policy’s fair market value. If, instead, he names the charity as the beneficiary of the policy, the tax benefit can be claimed by his estate upon his death, thereby reducing the tax hit on the estate for his heirs.”

Shelter capital gains
A charitable donation can also be used to shelter the capital gains realized from the sale of a business. “This will have to be carefully planned out in advance of the sale,” Ms. Van Cauwenberghe noted, “because the donation should be made in the year the business is sold. The client can claim up to 75% of his net income that year, and any unused amounts over the 75% limit may be carried forward for five years. However, he may not realize significant gains in income in the years subsequent to the sale, especially if he is retired.”

Charitable gifts don’t have to be large ones, and small but well-placed sums of money can make a considerable impact on charitable causes. There are a few tax issues relating to small donations that clients should be aware of.

There is a federal tax credit available for gifts to registered Canadian charities of 15% for the first $200 donated and 29% on amounts of more than $200, Ms. Van Cauwenberghe said. “So the client should consider accumulating tax receipts of small gifts over five years – the longest they can be carried forward – in order to get the higher tax credit.”

Married and common-law couples also have the option of having the couple’s total donations claimed on the tax return of the spouse with the highest taxable income, she added. “This is particularly beneficial when each person’s donations are under $200, but combined exceed $200.”

The reason: the super visa, given to parents and grandparents of Canadian citizens and permanent residents who want to visit their families in Canada for two years, makes insurance mandatory. Parents and grandparents must provide proof that they have obtained private medical insurance through a Canadian insurer. They must be covered for $100,000 per year.

The insurance must be valid for one year and cover health care, hospitalization, and repatriation. As for the super visa, it is valid for each entry in Canada and must be validated by an officer at the border. In addition, foreign tourists must pass an immigration medical exam before arriving in Canada.

According to industry professionals, this new market is a growth market because it is huge. “There are no fewer than 60,000 visa applications behind schedule. With this kind of delay, applications will not be seasonal. They will be made throughout the year, says Luc Lavigueur, director of business development at April International. The government intends to issue 38,000 per year. “It is estimated that the average premium is somewhere between $1,500 and $6,000.

What’s more, this market should generate significant income for advisors because it is mostly made up of elderly people. “These people will result in higher premiums,” says Erin Finn, director of enrollment at RSA Travel.

In response to the super visa, many insurance companies have added endorsements to their existing policies. By doing so, they hope to better serve this new clientele. “This is the case with TIC and Manulife,” said Patrick Lavoie, vice president of marketing at Sécuriglobe.

Big profits
Before the creation of the super visa, insurance requirements were less stringent. Customers bought the cheapest products. Ms. Parent says that some took out insurance for $25,000 or $50,000, even though hospital costs are expensive in Canada for a foreign visitor.

“The bill can come to between $3,000 and $5,000 for a day at the hospital, says Robin Ingle, chairman of Ingle International. He believes that this measure is a significant one not only for the government, but also for consumers and advisors.

Some, however, are less enthusiastic about this new market’s potential. Suzanne Langlois, director of travel and health at Ogilvy and Ogilvy, is one of them. “I do not believe this market is quite the godsend people think,” she said.

Ms. Langlois points out that the procedure for obtaining a super visa is arduous, which can lead to denial of applications. “Candidates must go through a number of steps in their country of origin. They must include a letter of invitation, and prove that their income is sufficient. In case of refusal, the premiums must be refunded,” she comments.

Raises awareness
According to Ms. Langlois, the super visa has the merit of letting people know that travel insurance is required when you stay in Canada. She says that some already knew this, but not everyone was aware of it.

Pierre Saint-Onge, vice president of Tour + Med travel insurance, is also lukewarm on the subject. His company is not present in this market and does not intend to enter into it because of the emergence of the super visa.

Mr. Saint-Onge believes that the market for visitors to Canada is only a small portion of the travel insurance market in general and that it does not generate enough premium volume to warrant his company developing a product. Tour + Med travel insurance will therefore continue to focus on Canadians who go abroad.

According to those advisors surveyed, it is still too early to comment on the number of claims that this clientele could make. “Grandparents will spend a long period of time in Canada, so they will be exposed to risks for a long time. This could increase the number of claims and, therefore, the cost of premiums,” said Ms. Finn.

In terms of policy sales in 2011 versus 2010, the renewable term CI product is losing steam (see table). Limited pay and permanent products are performing robustly.
Same scenario for premiums during this period, but limited and permanent products are growing at a less vigorous pace than the number of policies.

For now, the limited period product is capturing the lion’s share of total premiums (44%) and policies (42%) in 2011. Independent advisors reign supreme in sales, but captive agents boast faster growing individual CI business.

Affluent market
“Limited period product has fuelled career agent’s growth. Permanent product has supported growth [of the brokerage channel], as independents are more focused on the affluent market,” Ms.Terry explains.

Once an emerging market, today critical illness accounts for over $500 million in premiums and nearly 550,000 policies in force. The market still has strong potential because in force is growing steadily. Premiums in force climbed by 11% in 2011 compared with 2010. The number of policies rose by 10% during this period.

By comparison, premiums in force of disability insurance flirted with $1 billion, with more than 775,000 policies. This market is considered mature. Premiums in force edged up by 2% between 2010 and 2011 and policies in force inched ahead by 1%.

The LIMRA report also points to exceptional growth in the number of disability insurance policies in Canada, fuelled mainly by the guaranteed renewable policy. Although product premiums slid in 2011 compared with 2010, the number of policies exploded during this period.

Cheaper non-cancellable policies are mainly aimed at the blue-collar and self-employed clientele. The industry sells more but garners less premiums than with non-cancellable products.

LIMRA product research director Karen Terry says that market concentration also influenced these results. “The DI market is so concentrated that one company drove that trend, with its guaranteed renewable product sales,” she told The Insurance and Investment Journal.

New premiums rise
The report mentions that five out of eight suppliers saw new premiums rise in 2011 compared with 2010. Half of the suppliers had policy sales growth during this period. The non-cancellable product continues to be the strongest driver of Canadian sales in terms of premiums. Cancellable products dominate regarding the number of policies.

In fact, the cancellable insurance market has steadily declined for years. “A big player in that market, RBC dropped its cancellable product several years ago. There are few companies remaining in the market. It’s a restrictive product from a consumer standpoint,” Ms. Terry says.

Similar to our segregated funds, variable annuities posted sales gains of 13% between 2010 and 2011, to reach $159.3 billion.

Significant growth
“While we saw significant growth in the first half of 2011, third and fourth quarter annuity sales fell quarter-over-quarter, tempering the double-digit growth seen at the mid-year mark,” Joseph Montminy, LIMRA assistant vice president, annuity research explains, adding that “in this economic environment, VA companies are carefully managing the risks associated with their guaranteed living benefit riders, which has had an impact on overall sales trends.”

Sales of variable annuities stagnated in the fourth quarter, after six consecutive quarters of growth.

Immediate annuities are being fueled by demographics. Their sales peaked at $8.1 billion in 2011, equal to growth of 7% since 2010. “There are currently more than 42 million retirees in the U.S. and the number is expected to grow to 65 million by 2025,” Mr. Montminy adds. “Many of these retirees need to establish a guaranteed income stream that immediate annuities can provide. We anticipate demand for this product will grow for many years to come.”

By comparison, fixed annuities (deposits with guaranteed interest and immediate annuities) plunged by 22% in 2011 compared with 2010, and lost 16% in the fourth quarter compared with the same quarter of 2010. Total sales of these products were $2.7 billion in 2011.

Sales of combination products ebbed by 9% in 2011 compared with 2010. They slumped by 26% in the fourth quarter of 2011 compared with the corresponding quarter in the previous year. Total product sales stood at $3.1 billion in 2011. Combination products are deferred annuity contracts that let the holder make deposits in two investment categories. They are known as hybrid annuities in the United States. Seven companies offer them in Canada, the LIMRA report points out.

Total annuity and segregated fund assets were $116.3 billion at Dec. 31, 2011, equal to growth of 3% since 2010.

Apart from a few good quarters, segregated fund sales have been freefalling since 2004, Sally Bryck, associate research director at LIMRA, told The Insurance and Investment Journal in an interview. “Segregated fund premium growth increased slightly this quarter… but the number of contracts is down,” she adds.

Segregated fund deposits within TFSAs (tax-free savings accounts) rose by 60% in Q4 2011 compared with the same quarter of 2010 (73% in 2011 compared with 2010). “They are not taking off as hoped, but there is steady growth,” Ms. Bryck says. LIMRA data show that TFSAs represent only 2% of deposits channeled into segregated funds in 2011.

2011 got off to a strong start. New annual premiums gained 9% in the first quarter of the year compared with the same quarter of 2010. Yet premium growth slowed in Q4 2011, up 2% from the same quarter in 2010.

Universal life insurance caused the slowdown, Karen Terry, product research manager at LIMRA, told The Insurance and Investment Journal in an interview. Whole life sales surpassed those of universal life, she points out, although UL sales started the year robustly.

Clients seemed to rush to buy universal life before the wave of price hikes announced last year came into effect. Premiums soared by 18% in Q1 2011 compared with the same quarter in 2010 Then premiums dropped by 13% in Q4 2011 compared with the same period in 2010.

Universal life insurance sales faced many challenges, Ms. Terry explains. The pressure of low long-term interest rates is continuing, and insurers revised their level cost product prices upward, she explains.
Low interest rates are also clouding the US waters, she adds. LIMRA found that permanent universal life sales (lifetime UL) fell 7% in 2011 in terms of annual premiums. The influence of rates is palpable. LIMRA attributes the decline of this interest-rate sensitive product to price rises and companies’ exodus from this niche.

In 2011, universal life grew by an anemic 1% compared with 2010, including surcharges. The number of policies sold declined by 7% during this comparison period.

Whole life insurance was the all-around leader. New annual premiums were up 17% in 2011 versus 2010. All suppliers LIMRA surveyed reported growth, mostly in the double digits. Sales in terms of policies rose by 12% during the comparison period.

Ms. Terry cites several reasons for this growth. For one, insurers announced several changes to their whole life products. They also stepped up their advertising efforts and intensified promotion to sell more products in the large insurance amount niche.

Term insurance seems to be recovering after struggling in early 2011. Sales are down for the year overall, with a 3% drop in premiums, but they rose by 1% in Q4 2011 versus the same quarter in 2010. Term policy sales slumped by 4% in 2011 compared with 2010.

Regarding premiums, whole life insurance sales topped universal life for the first time in over 10 years, Ms. Terry says. They garnered 36% of total sales last year compared with 35% for universal life.

Premium growth remained stronger in the independent network than in the captive network in 2011, at 6% versus 3% in 2010. Universal life’s debacles stifled growth for independents in Q4 2011 – premiums stagnated over the reference period. Meanwhile, captives enjoyed steady growth throughout the year, buoyed by whole life results.