Asian immigrants represent an important and growing market for Canadian insurersBy Kate McCaffery | April 29 2015 09:00AM
More than 13 per cent of Canada's population today is made of up those immigrated from Asian countries. Of that, Chinese Canadians now number close to 1.5-million. In the ranks of top-performing insurance advisors, their numbers are even higher – proportionally speaking. Canada's multicultural imperative is one that is attractive to many who are seeking new passports, and the resulting cultural communities are uniquely influential in the industry – with companies dedicating significant resources in an effort to attract and cater to those populations.
Looking at Manulife Financial's top 100 producers, for example, Rob Park, Manulife Financial's national vice president of Asian markets says between 15 and 20 per cent of those on the list at any given time, are likely Chinese Canadian advisors. The company has two Manulife Asian Centres, one in Toronto, and one in Vancouver, with more than 200 advisors working in-house to serve the market. In addition to this presence, Park also estimates there are over 2,000 independent Chinese-Canadian advisors selling the company's products, many of whom work in managing general agencies (MGAs) focused on the Chinese community exclusively.
“The Chinese community, in particular, is a very significant part of our business here in Canada,” he agrees. “It represents a significant portion of our insurance sales every year. It's enough that we set up a dedicated wholesaling team.”
Broadly speaking, the approach is undoubtedly lucrative. Anecdotally though, one advisor in the industry, who did not want to be named, said advisors who serve this group of newly-arriving immigrants are the ones enjoying the most success.
Peter Wong, Manulife's managing director for advisory services in British Columbia says investor immigration programs likely have a lot to do with that phenomenon. “Newly-arriving Chinese immigrants have more stringent immigration rules to get into Canada. They're generally more affluent, they see the need for larger life insurance policies and, quite frankly, they are able to pay for larger policies. It wasn't that way 20 and 30 years ago,” he says. “Immigrants 20 and 30 years ago were mainly Cantonese-speaking from Hong Kong. Today, they're more from mainland China, and Mandarin speaking. There has been a shift.”
Another similar shift might be underway too, after Canadian investor immigration programs changed last year.
Before February 2014, federal immigration programs allowed those with demonstrated business experience and net worth of at least $1.6-million, gained legally, to immigrate if they gave an $800,000 interest-free loan to the country for five years and three months. Although the amount is called an investment by the government, Citizenship and Immigration Canada (CIC) returns the amount without interest.
When Bill C-31 became law on June 19, 2014, all applications still pending in the program were terminated. Those still without a decision after February 11, 2014 were told all fees paid, and investments made through the CIC, would be returned without interest.
The program has since been replaced by the Immigrant Investor Venture Capital Pilot program. It has also been replaced by provincial immigration programs, and an “express entry” program for skilled workers, which draws top candidates from a pool of ranked applicants.
The Investor Venture Capital program now requires applicants make a $2-million, non-guaranteed investment. Investments made under the terminated program were guaranteed. Immigrants also need to meet language and education standards, and have legal net worth of at least $10-million. Those with legal net worth exceeding $50-million can apply for an education exemption.
Whether they are of the wealthy elite or not, new immigrants share several common needs, many of which have not gone unnoticed.
Banks have perhaps made the most interesting moves to capture market share with this group. On both sides of the Pacific, Kenny Zhang, senior analyst and program director with the Asia Pacific Foundation of Canada says at least two Canadian banks are especially aggressive in targeting immigrant families, before they arrive in Canada. They do this by providing accounts, bank cards, and some credit, ahead of time.
“They're very aggressive”
“They're very aggressive,” he says. “Once they arrive, they can immediately use the bank's services. Of course, in that way, they'll be more attractive to families (who want to use) wealth management services with these banks.”
By virtue of their established presence in many of the countries immigrating families come from, companies like Sun Life Financial and Manulife also sometimes enjoy a degree of familiarity with the group. Beyond that, wealthy immigrants are not without their fair share of other industry suitors when they arrive, either.
Zhang says when any given family arrives in Canada, it's not uncommon for five or 10 different financial advisors to make an approach. “It can make them very uncomfortable,” he says. “Sometimes they backlash.”
Advisors may also offer some services or products that are unnecessary, whether families know it or not. “A few years after the transaction is done, the family may realize this is not the best product,” which, in turn, he says creates even more backlash.
“If you walk into a department store, and suddenly five or 10 sales associates approach you, it makes you feel uncomfortable,” he says. “People in this business need to discipline themselves, and make sure their products and services are more appealing to the real needs of those families.”
It's a generalization, but one tendency Chinese immigrants often hold in common, is the desire for guarantees – making insurance a popular product. “Part of our interest is to understand how and where can we adapt our business practices to make it easier for people in this market or other markets to do business with us,” Park agrees.
“When someone applies for insurance with us, specifically when they’re applying for a large amount of insurance, we want to understand. Do they need it? Does it make financial sense? A lot of their wealth is maybe overseas too; it’s not easy to quantify. What is it worth? What do they really have? It’s not like we can get a statement from one of the banks, so we’ve adapted our practices for how we recognize overseas wealth.”
That drive for guarantees is a big part of what makes the market different compared to others, says Vicken Kazazian, senior vice president of Sun Life's career sales force.
“They do like guarantees,” he agrees. “It's a common thing, but I think it's probably a bit more pronounced there. They're not sure how much risk they want to take. Overtime, though, I suspect that changes as they understand things more.”
Advisors need to be a good source of reference
In addition, he says advisors need to be a good source of reference for newly arrived families. Depending on their circumstances, a family may need anything, or everything, from a basic primer on mutual funds and their uses, to referrals – direction to real estate and mortgage specialists, immigration services, community groups, or just a neighbourhood with Chinese markets.
More technically too, an advisor to the super elite would also need to know certain facts about currency trading, for example, particularly after Canada reached an agreement with China in November 2014, to establish a Canadian hub for trading Renminbi (RMB) in North America.
“It's a center that allows settlement of trades and other transactions denominate in RMB,” Zhang says, creating definite benefits for those with RMB-denominated assets. “Every time you change money, there's a transaction fee. Then, if you do business audits, or trade with a Chinese partner... Every time you transfer money, you lose on the commission - 1 per cent, 2 per cent, even sometimes higher. If you can deal directly in RMB too, a Chinese partner will normally give importers or exporters a small discount.”
Thoughts about taxation may require discussion, as well. Although tax returns are not a foreign concept, governments tax assets differently, often requiring a discussion about insurance products, and their uses.
“Every insurance company sees opportunity in the immigrant market,” Kazazian agrees. “There are a lot of needs there.”