THE BOOMER CASE FOR THE BANKS - WHY THE BANKS ARE POSITIONED TO BE THE "ADVISOR RESOURCE" OF CHOICE FOR 14,000,000 RETIRING BOOMERS IN CANADA

Here are the Boomer Stats

as at 12/2008

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Primary Financial Advisor:

Advisor with Bank Branch/Trust Company 58%

Financial Planner/Financial Advisor 28%

Investment Advisor/Stockbroker 12%

Insurance Agent or Broker 2%

Source: Advisor's Edge Dec. 2008

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Our focus is female Boomer Spouses

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Our Solution

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COMMUNITY WEB BASED REAL TIME DEMAND - BANKING INDUSTRY

· WEB BASED SIMPLIFIED NEEDS ANALYSIS (FNA) SOFTWARE and COLLABORATIVE COMMUNICATIONS APPLICATIONS ARE A KEY TO THE GROWTH OF THE CANADIAN BANKING INDUSTRY’S FOCUS ON GROWTH THROUGH A “charge to sell their products directly to consumers via phone, e-mail and “snail” mail.”

· The banks are determined to replace the life insurance industry’s natural market constituency. They have done it before. They took the RRSP market away from the life insurance industry’s absolute legislated control and the Canadian market for RRSP’s grew exponentially.
· The banks have a ubiquitous, dominant and natural Canadian market constituency. The life insurance industry does not.

· We can add our superior web based applications to the banking industry’s list of distribution channels

· This report focuses on the introduction of our applications in support of the banking industry’s drive to dominate the void left by the life industry’s abandonment of its exclusive career agency platform commencing in 1996 and with it now being substantially withdrawn from the key growth sector in the life insurance market, namely, the middle income market.

· In abandoning the career platform the life industry removed itself as the exclusive source of new recruits to the life sector. The banks have replaced this recruiting void as a key source of recruits through its life, mutual funds and securities divisions.

· They are poised to dominate the life sector.

· We can provide them with their “tipping point”.


GOING DIRECTLY TO THE CLIENT

Bank-owned life insurance companies are leading a charge to sell their products directly to consumers via phone, e-mail and “snail” mail.At first blush, it’s a trend that could worry and irritate advisors. But even some traditional insurers openly admit that it’s a distribution model with which advisors can co-exist — and they have found a way to keep advisors happy. The numbers are surprising. A Forrester Research Inc. report (PREEMINENT US RESEARCH GROUP) shows that while advisor-based life insurance sales are still by far the dominant channel, accounting for 59% of sales, 20% of Canadians applying for life insurance do so over the phone, 16% by mail and another 5% online. The Massachusetts-based researcher’s report, published this past November, is based on a 2006 survey of more than 6,000 Canadians.Defining exactly what products were sold is tough, but the report did find that about $3.5 billion, or less than 3% of total premiums sold in 2006, is defined as “creditor insurance” — the kind that banks can sell to protect their clients’ mortgages, lines of credit and credit card debt, for example. Byren Innes, senior vice president and a director of Toronto-based consultancy NewLink Group Inc. , says direct sales isn’t a core channel: “But it’s a growing channel. It’s meaningful, and the numbers add up.”Moreover, there is consensus in the Canadian life insurance industry that direct sales are an integral part of the industry’s growth outlook. Up for grabs is the middle-market Canadian who either has no insurance or is underinsured. The logic is that most traditional insurance advisors don’t serve the largest part of the population because they can’t make an easy living doing so. It’s much easier to focus on more affluent clients; even if there are far fewer of them, a sale or two of high-premium universal life beats a handful of accidental death and term-10 policies every time. “Our research suggests that 57% of middle-market Canadians don’t have an insurance agent,” says Gordon Henderson, president and CEO of Toronto-based BMO Life Insurance Co. “The stat that floors me is that 36% of households say that no one has ever approached them to buy individual insurance.”So, the Big Five banks and their life insurance subsidiaries have marched in. The Bank Act doesn’t allow them to comb client data to cross-sell life insurance policies such as term products, universal life or annuities. But regulations allow them to sell creditor insurance and, in some cases, accidental death policies.The policies that are sold directly may be relatively small, but this category of products represents the thin end of the wedge, so to speak. Once the bank-owned insurer sells an accidental death policy to a client, it can now sell the client its entire suite of products, because the client has become a client of the life insurance subsidiary. BMO Life, for one, has seen 30% annual growth in premium sales since it opened up shop in 2002, says Henderson. Its raft of products includes some simplified term products and critical illness insurance, which it introduced late in 2007. All of this is offered to consumers in an online environment in which an underwriting agent works in the background. “If you answer ‘yes’ to four questions, you’re covered for $100,000,” says Henderson of the CI product. BMO life will continue to invest in the online channel, aiming to maintain its 30% annual growth target via direct-mail campaigns, call centres and the Internet. “The market is just that huge,” Henderson says. “The key is to get to people and introduce your products in a market that isn’t being approached by the traditional agent force.”All of the banks’ life insurance units — none of which ranks in the top 10 insurers in Canada by assets — are in this online market, in which the focus is on simplified, easy-to-understand, relatively low-cost products to meet needs that clients can easily articulate.


Mark Cummings, managing director and head of domestic insurance at Scotia Life Insurance Co. in Toronto, says direct life insurance has become a growth platform for the parent bank, and Scotia Life is rapidly growing its customer base. It is among the leaders in the direct-sales business, along with Toronto-based TD Life Insurance Co. Scotia Life sells guaranteed issue life, hospital cash insurance, term life insurance and accidental death insurance.
· If we add an interactive web based training/communications application to the Needs Analysis software that we have developed the banking industry will be able to replace the career life insurance platform that began to collapse in 1996 and is essentially gone today. With the loss of the career system there is little recruiting of new agents to the life industry. The MGA platform does not recruit new agents and is now suffering from a lack of new blood.

· The banks are filling the recruiting void and are poised to dominate the middle market.

· They need our technology.

· We can now provide it.

· For the past 10 years the banking industry in Canada has been trying to offer life insurance products to the Canadian marketplace. The Federal legislation prohibits them from selling their products within bank branches.

· They are going to try again.

· If they could service the broad middle market which has no life agent via a simplified web based needs analysis software application by entering their personal data directly or with the help of a 1 800 CSR the banks could make the case to the Federal government that they are filling a vital life insurance void left by the traditional life insurance industry because the typical agent has moved away from the middle market into the affluent market because advisors cannot earn a living in the middle market and can do well financially in the the affluent market.

· This market situation is identical in the US.

RBC Life Insurance Co. of Mississauga, Ont., is the product of a handful of acquisitions made by its parent, RBC Financial Group, and its strategy very much reflects a multi-channel, multi-platform approach. “The industry has consolidated quite a bit over the past 10 years with all the M&A activity that has taken place,” says John Young, president and CEO of the carrier. “RBC Life is a part of that.”RBC Life includes a number of distribution platforms. It has a 300-member career sales force, a managing general agency business, national accounts, direct sales, near-branches and strategic alliances. It counts up to 17,000 wholesale advisors who have done business through its MGA. “The vast majority of all life insurance and wealth [product sales] comes through the MGA channel, so it’s a very important channel for us, and one in which we’re very active,” says Neil Paton, vice president of insurance sales development at RBC Life. At least a third of its living-benefits sales arrive via the MGA channel as well.RBC Life’s national accounts include advisors at sister firm RBC Dominion Securities Inc. and other traditional investment dealers and mutual fund dealers across the country. The company has also developed a strong market among small insurance brokerage outfits, and some of the larger, multiple-advisor producers. “We have a lot of history there, especially in the living-benefits marketplace,” says Paton. It doesn’t end there. RBC has a long-standing corporate partnership with State Farm Group of Cos. , based in Illinois. RBC provides individual disability insurance to the Canadian unit, Aurora, Ont.-based State Farm Insurance. It also offers the same product through Sun Life Financial Inc. “Where other entities don’t have the skill or expertise that we do, we form strategic alliances with them,” says Paton. “We have a number of relationships like that.”Among those relationships, RBC provides an exclusive universal life product to Toronto-based PPI Financial Group, the national managing general agent and brokerage that has carved out a niche in the high net-worth market.

RBC Life’s direct sales channel is also growing quickly with the help of third-party agency, the Edge Benefits Inc. , based in Newmarket, Ont., through which it sells what it calls “simplified” life insurance. The Edge provides product administration and markets disability insurance mostly to small business owners who do not have the finances to fund a full employee benefits program. “We have a method in which we insure [the policyholder’s] gross revenue, as opposed to net income, which is a problem for self-employed people,” says Paton. “So, we’ve had quite a bit of success there over the past five or six years.”Most recently, RBC Life launched simplified critical illness insurance for coverage of cancer, heart attack and stroke, with benefits up to $75,000. It also announced new renewable rates for its term 10 and 20 products. Not to be forgotten, the company operates a 300-advisor career sales force as a national entity separate from other channels. Last year, it equipped this sales force with new laptops that were loaded with illustrations software. The advisors, spread among 19 branches across the country, concentrate mostly on life insurance sales, with about 10% to 15% of their sales in living benefits. Full financial planning is not yet part of the equation for the advisors, says Paton, and, as such, new recruits are expected to meet minimum regulatory licensing requirements — although the certified life underwriting designation is encouraged, says Young.

CAREER AGENTS

Paton notes the career channel tends to attract recruits who appreciate the value of the RBC brand, the training program and the breadth of the product offering. “We have a bank act that prevents us from certain activity,” he says. “But there’s a lot of things we can do to promote awareness of insurance and provide general information to those customers, which can drive more opportunities to our organization.” Branch managers are under orders to hire, train and develop growth organically, one rep at a time. “That means bringing in young talent,” Young adds, referring to the aging insurance advisor. Rounding out the distribution are the so-called “near-branch” outlets that RBC Life has bundled together on street corners and in strip malls with Royal Bank of Canada branches. These tend to sell mostly property and casualty insurance, product categories that are not under CEO Young’s watch. But, he says, the outlets are increasingly selling the simplified life insurance and living benefits solutions as well. “The growth we see in these channels is high from a percentage stand point,” he says. “But it may be because the base is rather smaller.” This smorgasbord of distribution channels hasn’t necessarily satisfied RBC Life. If the right opportunities came along, it could still open up more channels with other acquisitions. “We think of ourselves as a multi-channel organization,” Young says. “And we’re trying to reach a broad swath of clients. To do that we know we have to run effectively multiple distribution channels.

”SEG FUND OFFERING

On the product side, the company has jumped into other waters. In November 2006, it launched 12 segregated funds, or RBC Guaranteed Investment Funds, with underlying RBC Asset Management Inc. funds, as well as four model portfolios to suit different investor profiles. Sales “met expectations,” says Young, and the company added two new funds to its lineup in 2007. “We wanted that seg funds offering, because it is a key product for asset-accumulation solutions but for income-distributions solutions, as well,” adds Young. “Or, for mitigating the risks of investment after folks retire because of the guarantees that seg funds offer.”He notes that RBC is watching the guaranteed minimum withdrawal benefit market closely, but it’s not about to make any product announcements of its own.Inside the RBC Financial Group, RBC Life is well supported, adds Young: “Royal Bank recognizes the role that improving insurance results can play in differentiating us, and moving us away from other financial services institutions.” RBC Life’s executives see an opportunity to service and sell to a large group of Canadians whose needs are not being met by the marketplace. They say the overall RBC Financial Group was created to develop wealth-management strategies among the traditional banking, brokerage and insurance silos as much as is possible under current regulations. “It’s in its infancy, but it’s still a mammoth opportunity to serve the Canadian marketplace,” says Paton. “We have robust expectations about the future potential,” adds Young, “and growth that can come out of this.”


Mississauga, Ont.-based RBC Life Insurance Co. is relatively new to the direct-marketing channel, but its president and CEO, John Young, confirms that this is an important channel for the company. “There’s a segment of the client market that prefers this channel,” he says.
So, where are the traditional insurers? They’re selling directly, to some extent, but there’s no question that traditional carriers are conflicted about the channel. And they don’t want to give the wrong impression to advisors. “Our company position is around financial advice and life-time financial security,” says Ray Kong, vice president of marketing of individual insurance and investments at Sun Life Financial Inc. in Waterloo, Ont.

· “But we also recognize that there is a significant part of the population that is unwilling or hesitant to engage with an advisor.”Sun Life wrapped up a successful accidental death insurance direct-mail sales campaign in the fourth quarter of 2007;
· Its consumer response rate was more than 20%. “In the direct-marketing world,” Kong says, “that’s unheard of.”The policies are relatively small and they added up to fewer than 4,000 in total, but campaigns such as this show insurers that their advisors can’t reach everyone who needs insurance. Just as important, Sun Life has found a way to sell directly to clients with the approval of its advisors: the insurer asks an advisor for permission to call a segment of his or her clients; most advisors give it (less than 1% have declined); then the advisor receives a small slice of commission and they’re informed if a client buys. “It helps advisors identify who is undergoing life change, or who is thinking of insurance more,” Kong says. “An advisor might call the client to thank him and to talk about what else might work. We’ve seen ancillary sales success, too.“The view in the industry is that direct sales and the advisory base are competing channels, but we really do believe that they are complementary,” Kong adds. “You’ll never sell a complex product like universal life directly. But direct sales gets people in the door.”
Technology is also part of it, says Brad Smith, president of Toronto-based ReMark Americas, a unit of Amsterdam-based ReMark International BV, and a consultant who has three of the top five banks as clients. If brokers, MGAs and the insurers can sort out their databases, the economies of scale for mass marketing will be obvious. “We feel that there’s a much bigger opportunity out there,” he says.

· Many signs suggest that the direct-sales trend is going to grow. Forrester’s research shows that 23% of Canadians use the Internet to research life insurance. Another 29% complete research over the phone, while 15% do so by mail. The implication is that once the technology is available to underwrite through these channels, sales will follow. “It’s nothing but good for the whole industry,” says Henderson. “If people don’t start somewhere, they go much of their lives without the basic coverage.”

RBC Life uses a multi-platform approach to serve its market

Canada’s largest bank is moving aggressively into the growing market for life and wealth products
RBC Life Insurance Co. of Mississauga, Ont., is the product of a handful of acquisitions made by its parent, RBC Financial Group, and its strategy very much reflects a multi-channel, multi-platform approach.
“The industry has consolidated quite a bit over the past 10 years with all the M&A activity that has taken place,” says John Young, president and CEO of the carrier. “RBC Life is a part of that.”RBC Life includes a number of distribution platforms. It has a 300-member career sales force, a managing general agency business, national accounts, direct sales, near-branches and strategic alliances.
· It counts up to 17,000 wholesale advisors who have done business through its MGA. “The vast majority of all life insurance and wealth [product sales] comes through the MGA channel, so it’s a very important channel for us, and one in which we’re very active,” says Neil Paton, vice president of insurance sales development at RBC Life. At least a third of its living-benefits sales arrive via the MGA channel as well.RBC Life’s national accounts include advisors at sister firm RBC Dominion Securities Inc. and other traditional investment dealers and mutual fund dealers across the country. The company has also developed a strong market among small insurance brokerage outfits, and some of the larger, multiple-advisor producers. “We have a lot of history there, especially in the living-benefits marketplace,” says Paton.
It doesn’t end there. RBC has a long-standing corporate partnership with State Farm Group of Cos. , based in Illinois. RBC provides individual disability insurance to the Canadian unit, Aurora, Ont.-based State Farm Insurance. It also offers the same product through Sun Life Financial Inc.
· “Where other entities don’t have the skill or expertise that we do, we form strategic alliances with them,” says Paton. “We have a number of relationships like that.”

· Among those relationships, RBC provides an exclusive universal life product to Toronto-based PPI Financial Group, the national managing general agent and brokerage that has carved out a niche in the high net-worth market. RBC Life’s direct sales channel is also growing quickly with the help of third-party agency, the Edge Benefits Inc. , based in Newmarket, Ont., through which it sells what it calls “simplified” life insurance. The Edge provides product administration and markets disability insurance mostly to small business owners who do not have the finances to fund a full employee benefits program. “We have a method in which we insure [the policyholder’s] gross revenue, as opposed to net income, which is a problem for self-employed people,” says Paton. “So, we’ve had quite a bit of success there over the past five or six years.”Most recently, RBC Life launched simplified critical illness insurance for coverage of cancer, heart attack and stroke, with benefits up to $75,000. It also announced new renewable rates for its term 10 and 20 products.

· Not to be forgotten, the company operates a 300-advisor career sales force as a national entity separate from other channels. Last year, it equipped this sales force with new laptops that were loaded with illustrations software. The advisors, spread among 19 branches across the country, concentrate mostly on life insurance sales, with about 10% to 15% of their sales in living benefits. Full financial planning is not yet part of the equation for the advisors, says Paton, and, as such, new recruits are expected to meet minimum regulatory licensing requirements — although the certified life underwriting designation is encouraged, says Young.

CAREER AGENTS

Paton notes the career channel tends to attract recruits who appreciate the value of the RBC brand, the training program and the breadth of the product offering. “We have a bank act that prevents us from certain activity,” he says. “But there’s a lot of things we can do to promote awareness of insurance and provide general information to those customers, which can drive more opportunities to our organization.” Branch managers are under orders to hire, train and develop growth organically, one rep at a time. “That means bringing in young talent,” Young adds, referring to the aging insurance advisor. Rounding out the distribution are the so-called “near-branch” outlets that RBC Life has bundled together on street corners and in strip malls with Royal Bank of Canada branches. These tend to sell mostly property and casualty insurance, product categories that are not under CEO Young’s watch. But, he says, the outlets are increasingly selling the simplified life insurance and living benefits solutions as well. “The growth we see in these channels is high from a percentage stand point,” he says. “But it may be because the base is rather smaller.”

This smorgasbord of distribution channels hasn’t necessarily satisfied RBC Life. If the right opportunities came along, it could still open up more channels with other acquisitions. “We think of ourselves as a multi-channel organization,” Young says. “And we’re trying to reach a broad swath of clients. To do that we know we have to run effectively multiple distribution channels.”
SEG FUND OFFERING on the product side, the company has jumped into other waters. In November 2006, it launched 12 segregated funds, or RBC Guaranteed Investment Funds, with underlying RBC Asset Management Inc. funds, as well as four model portfolios to suit different investor profiles. Sales “met expectations,” says Young, and the company added two new funds to its lineup in 2007. “We wanted that seg funds offering, because it is a key product for asset-accumulation solutions but for income-distributions solutions, as well,” adds Young. “Or, for mitigating the risks of investment after folks retire because of the guarantees that seg funds offer.”He notes that RBC is watching the guaranteed minimum withdrawal benefit market closely, but it’s not about to make any product announcements of its own.Inside the RBC Financial Group, RBC Life is well supported, adds Young: “Royal Bank recognizes the role that improving insurance results can play in differentiating us, and moving us away from other financial services institutions.” RBC Life’s executives see an opportunity to service and sell to a large group of Canadians whose needs are not being met by the marketplace. They say the overall RBC Financial Group was created to develop wealth-management strategies among the traditional banking, brokerage and insurance silos as much as is possible under current regulations. “It’s in its infancy, but it’s still a mammoth opportunity to serve the Canadian marketplace,” says Paton. “We have robust expectations about the future potential,” adds Young, “and growth that can come out of this.”

Source:
Investment Executive
January 2008
A Final Observation:

Dan Zwicker.

The Banks have an ‘Outside – In’ marketing focus. They work from the customer back – they include the customer’s agenda. RBC has used ‘FIRST’ in its advertising for several years to emphasize their focus on the customer as being their FIRST priority.

The Life Insurance Industry has an ‘Inside – Out’ marketing focus. They promote their product agenda.

For over 30 years the best and the brightest CEO’s (Jack Welch – GE) have produced their success through an ‘Outside – In’ marketing discipline.

The Banks have it right.

The life companies have it wrong.

The banks have gained preferred boomer market share. (58%)

The life companies have very little preferred boomer market share. (2%).

The information technology industry (IT) has typically focused on the ‘T’ – data – for use ‘Inside’ the corporation.

We are focused on the 'I' – information – which reflects consumer need ‘Outside ‘ the corporation.

Real time global access to the consumer is available to translate need into demand.

The paradigm is an ‘Outside’ – ‘In’ customer centric operating focus.