Let’s weed out bad apples togetherBy Donna Glasgow | January 23 2014 06:52PM
While 98 per cent of financial advisors do their work well, the two per cent who don’t can damage the reputation of the whole industry. It is in the interest of all insurers to weed out these bad apples agreed the panelists at The Insurance and Investment Convention’s CEO Summit: Key issues of 2014.The problem, however, is that the insurer who has the courage to denounce such individuals may risk tarnishing their own reputation in the process, explained Yvon Charest, president and CEO, Industrial Alliance.
“My concern is that when there is a bad apple in the industry, and then we decide to attack – instead of letting them go work for someone else – then the insurer with the courage to do this will be the one mentioned in the newspapers.
For this reason, Charest said that his company has asked Quebec’s financial markets regulator, the AMF, for help in this regard. “If there are rotten apples in our industry and we don’t want them, then stop pointing the finger at the institution which has the courage to clean house.”
Denis Berthiaume, president and COO of Desjardins Insurance added that another related issue is that when regulators crack down on rotten apples, their measures often impact all advisors. “What stops me from sleeping sometimes is to see how we deal with the two per cent and the wall-to-wall measures imposed on the industry at times to manage this two per cent.”
Targeted measures needed
This is a burden for advisors’ practices and a burden for insurers. Berthiaume would like targeted measures for the two per cent as opposed to blanket measures for the industry that add costs, complexity and do not, in fact, resolve the issues related to the two per cent.
He says it is important for the industry to work closely with regulators to get its message across and ensure that the measures taken will truly help meet the objective of weeding out the bad apples. “This is the only way to get good results.”
Steven Ross, president and COO of La Capitale Financial Group's Life and Health Insurance and Financial Services division, said special attention to product development is another way to manage the risks associated with questionable advice or practices of a small number of advisors. As product manufacturers, he says insurance companies should look at what possible uses could be made of their products, what concepts could be applied to them.
He adds that offering simpler, more transparent products, which are easier to explain to consumers, would also reduce risk.
Ross adds that everyone wins by being more vigilant – advisors and insurers. “We all should be vigilant about compliance and follow ups...Everyone has a role to play.”