AFL transforms into multi-supplier group

By Alain Thériault | May 13 2014 03:11PM

The new blood infused into Lévis, Quebec-based AFL Groupe Financier since 2005 has transformed the firm from a regional AXA-centred office to a multi-supplier managing general agency. The firm now serves a team of nearly 1000 financial advisors across Quebec.In addition to the Quebec City area, AFL Groupe Financier has an office in Chicoutimi, and serves several other regions, notably Gatineau and Côte-Nord.

Founded by Germain Fontaine and Armand Lemay in 1983, Assurances Fontaine Lemay evolved into AFL Groupe Financier. AFL’s solid growth began in 2005, the year Yan Charbonneau joined the firm as director of business development. At age 65, Fontaine retired on May 1, 2013, after a 31-year career and Charbonneau became CEO of AFL.

Marie-Ève Fontaine, the founder’s daughter, will become marketing director when she returns from maternity leave. Her father had been the sole remaining founder until his retirement; Lemay died in 2005.

Acquisition strategy

Fortified by new blood, AFL nearly doubled its sales last year. Charbonneau and Lapointe shared the reasons for AFL’s success when interviewed by The Insurance and Investment Journal. Acquisitions were a logical avenue: four firms were bought in 2012 and other acquisitions are imminent. “We are eyeing an acquisition in Montreal in the short term,” Charbonneau says.

AFL also grew organically, in a big way. Mr. Charbonneau kickstarted this growth by surrounding himself with developers. In 2008, he hired Dominique Rochette, formerly of SSQ Financial Group, as director of business development in the investment sector. He became Charbonneau’s right arm in recruitment.

In 2011, Charbonneau brought in Lyne Lapointe, well-known in the living benefits sector, after a career as a specialist at Groupe Cloutier. At AFL, she added life insurance to her development and support responsibilities. As life insurance and living benefits director, Ms. Lapointe recruited heavily in life insurance. “Lyne’s arrival in 2011 made a very significant difference in this sector,” Charbonneau confirms.

To better manage and ensure quality with the influx of new business, AFL set up a compliance department. Its director, Alain Chabot had been a product specialist for the firm for nearly 20 years. Flanked by new and experienced associates, Yan Charbonneau positioned AFL as a multidisciplinary firm. As a chartered accountant and tax expert, he can help advisors with complex files.

GIC-powered growth

Standing out from its competitors was instrumental to AFL’s success. “Our growth is also powered by our differences from the competition,” Lapointe says. One difference that has worked to AFL’s advantage is the choice of untapped niches. After signing a recent distribution agreement with Épargne Placements Québec, AFL Groupe Financier’s sales of guaranteed investment certificates (GICs) skyrocketed.

Its heavy volume made AFL a major distributor of GICs and fixed income products like step-up and fixed-rate government bonds. Although the initial agreement was signed in 2000, between 2008 and 2013, the transaction volume grew by 25% annually, for slightly more than $100 million in 2013.

This progress helped AFL boost its sales force. Before Charbonneau arrived in 2005, the AFL sales force was about 20 advisors strong, and was concentrated within the family. Today 1000 advisors are on board. Mr. Charbonneau attributes this expansion to his vision of transforming the family firm into a province-wide MGA.

Robust sales of GICs in recent years have also fueled growth. To succeed in brokerage amid a sea of long-established MGAs, you have to do things differently. In this niche, the margin is razor thin and profitability rests on volume. “Initially, this sector didn’t even cover my travel expenses,” Charbonneau quips. “It was a loss leader that brought customers to advisors for their first meeting. Now we have enough volume for it to be profitable.”

“We are targeting advisors with baby boomer clients who will soon be getting out of investment funds because of imminent retirement. They will buy more and more GICs. Before, we would say that when the equity market rises, GICs fall. We’re not seeing this correlation anymore. Quite often, retirees do not want to go into funds anymore,” he explains. The strong presence of AFL in this sector let his advisors multiply their retirement planning activities, he adds.

AFL is also banking on its youth. “We are a very effervescent firm,” Yan Charbonneau says. At age 36, Charbonneau considers young people as another natural market for him and his company. These young people also need support. “A 26-year old is as likely to ask me to bring out illustrations for him as an older advisor,” he points out.

Having a youthful vision lets the MGA carve out its own path, Lapointe says. “Established MGAs are going on the road less and less often. We do the opposite,” she says. She likes to meet individually with advisors.

Simplified issue products

As guaranteed product prices climb, Lapointe sees great potential in simplified issue products. “The rise in prices of guaranteed products has boosted sales of term insurance. Each insurer seems to be launching a guaranteed issue or simplified product. We have to be open-minded and go toward these less selective products. There’s a product for every need; advisors must know about this,” she says, listing products like those of Canada Protection Plan, Humania Assurance and Industrial Alliance, along with its subsidiary L’Excellence.