Sun Life urges advisors to adopt holistic approach to financial services

By Donna Glasgow | March 27 2008 04:12PM

With the baby boomers on the brink of retirement, their changing and increasingly complex financial needs demand that advisors deliver holistic financial services that address a range of insurance and investment issues, says Kevin Strain, senior vice-president, individual insurance and investments of Sun Life Financial.

In an exclusive interview with The Insurance Journal, Mr. Strain said that delivering this message to advisors, and ensuring that Sun Life is offering the products and tools that advisors need to provide such holistic service, has been one of his priorities since taking on his position in July 2007.

"For me, we’ll have good advisors who sell just insurance and good advisors who sell just wealth, but the really great advisors will be selling holistically across insurance, health insurance and wealth management."

Four key needs

The reason that holistic advice is so important is that the boomer demographic is beginning to move from the wealth accumulation phase into retirement. There are four key needs when someone moves into this stage of their life, he explains.

The first need is income; "How are you going to replace your income stream?"

Second is longevity; "How am I going to make sure that I don’t outlive my assets?"

Third is health insurance; "You may have had health insurance in your group plan, but now you are left without health insurance."

And fourth; "You have an estate planning need if you want to pass on assets onto your children, charity, or whatever it might be."

These four needs of this demographic are driving Sun Life’s strategy with respect to its sales force. "The advisor who is doing the best job for their customer is talking to their customer, who is at that stage in life, about all four needs and the products that meet all four of those needs," says Mr. Strain.

The babyboomers have been in their prime accumulation years for the past 10 to 15 years, heaping assets into such products as mutual funds or segregated funds. These products work well for accumulating wealth, but not de-accumulating, explains Mr. Strain. For that, what is required is an income stream that could be provided by a RRIF, paid annuity or the new guaranteed minimum withdrawal benefit (GMWB) product. And while there are a number of products that can provide an income stream, they don’t all protect against longevity risk, as GMWB’s or annuities do. This makes insurers uniquely positioned to take advantage of this trend, he says.

Seeing it happen

Mr. Strain adds that the industry has been anticipating the trend from accumulation to de-accumulation for the last decade or so, but the difference now is, "We’re actually seeing it. Our sales have grown 16% per year in the last couple of years and it’s been driven by demographics."

Sun Life has been seeing strong sales across all wealth products whether it be segregated funds, mutual funds, annuities or the new SunWise Elite Plus product that provides longevity risk protection. This product, that is a GMWB sold as a rider attached to a segregated fund has proven so successful that it helped propel the insurer’s segregated fund sales results up 75% in the third quarter of 2007 over the same period one year earlier. Fourth quarter results showed a 37% increase in individual segregated fund sales over the same period in 2006 with $426 million in sales.

Mr. Strain believes this growth is due to both a combination of a general increase in investor interest for segregated fund products and the introduction of the GMWB rider. "That product had a big impact."

He also believes that the impressive segregated funds sales growth partly driven by this product is only in the early stages, especially if more advisors get on board and seize the market opportunity. "I think we have a lot of opportunity to grow this together…I think this is only a fraction of where it could be."

To get an idea of how huge the potential market opportunity is, just think of the amount of assets in mutual funds, he suggests. The average deposit made into Sun Life’s GMWB product is more than $100,000, he adds. This high amount is due to the fact that clients are moving their RRSP funds into their GMWB.

Don’t miss the money boat

Accumulation products have been sold by various distribution channels such as Investment Dealers Association (IDA) firms, banks and insurance advisors. Of these three, only the insurance advisor channel has experience with longevity risk and the sophisticated products required to address this need, thus leaving the market wide open for an insurance advisor who decides to expand his service offering into the wealth side, Mr. Strain says.

"The insurance advisor is very well situated to take advantage of the trend of accumulation to de-accumulation, so it would be a shame to see them miss out." Insurance advisors have an edge over the competition both in terms of understanding these types of products and having access to them.

"A bank doesn’t have a paid annuity, they don’t have a GMWB today. I am not saying they will never have it, but we have an advantage in terms of having those discussions with our customer base."

The insurance industry’s edge is also sharpened by the strong relationships that insurance advisors have with their clients, he adds. Developing a client’s wealth de-accumulation strategy involves a complex set of discussions over a long period of time in a trust relationship, says Mr. Strain, which favours the insurance advisor.

A pre-retiree who bought mutual funds through a bank, for example, is unlikely to have a long-term relationship with a bank employee. "Your bank manager could be a different person every time you go in there." For advisors, he explains, "The opportunity is there. They should all be thinking about that wealth piece."

Mr. Strain says he doesn’t know what percentage of Sun Life’s advisors in the company’s career and wholesale channels are presently offering holistic services, but he does add, "There’s not enough who are doing it." That’s why his company is "creating the education on the need" and offering training to use the products and the tools that advisors need to deliver holistic services. "The front end of the babyboomers is 62 this year, so this is the exact right time to be doing this."

Mr. Strain adds that it is not only insurance advisors who should be shifting their practices to holistic services, he would also like to see advisors who are mainly focused on investments offer more insurance services.

And, he’d like to see everyone selling more health products.

Re-energizing health product sales

While Sun Life is a market leader in the living benefits market with about 65% of the market share for long-term care (LTC) and one of the market leaders in critical illness insurance (CI), Mr. Strain acknowledges that this is an area that represents the biggest product challenge for Sun Life in its strategy to provide holistic service. Sun Life’s sales have been stagnating in the living benefits market, the same as for the market in general.

"We’ve been pretty flat overall, so it’s an area I’d like to see us get some more focus on and renew some energy around."

He believes the problems in this area are caused by lack of awareness among the public and advisors and the more rigorous underwriting process involved for CI compared to life underwriting. "That creates some noise for advisors."

To renew energy in the company’s health products, Mr. Strain says Sun will be doing some product development work and increasing its marketing efforts. "To be successful you have to be out and reminding advisors about the products."

What about specialization?

Does Sun Life’s holistic strategy fly in the face of many leading advisors recommendations to specialize in a particular niche? Mr. Strain says that while he understands the specialization point, the advisors who are meeting all three needs for life and health insurance and wealth services are doing the best job of serving their clients’ needs, as well as protecting their customer base from competitors. "If you’re not selling across this, somebody else is coming in and selling it."

However, he adds that advisors can achieve the goal of offering holistic advice without necessarily doing it all by themselves. For example, Sun Life’s career channel has seen growth in the development of multi-advisor corporations.

An example of this kind of arrangement would be a few advisors teaming up and bringing on an associate advisor and a couple of administrative assistants. Sometimes the advisors will bring on a specialist, such as a living benefits expert or asset management specialist who will sell their products to a shared customer base. Multi-advisor corporations take many forms, "but in all cases they would typically be some of our top wealth producers and some of our top life insurance producers," says Mr. Strain.

He adds that on Sun Life’s career side, there are many sole practitioners who are also delivering holistic advice well. Some of them are even paring down the size of their client base, so that they can serve their clients’ full needs as they head towards retirement, he added.

Working holistically will "help the advisor get their arms around that customer" and they can do it themselves, through referrals, or with multi-advisor corporations. The key objective is to make sure the clients’ full needs are met, he adds.

Crystallizing the concept

Since last fall, Sun Life has been orienting its advisor training around this holistic advice approach and developing its product suite around this strategy. "We’re trying to build out life insurance, health insurance and wealth products right across that need, so that advisors have confidence in our product portfolio."

While elements of this strategy have been around in Sun Life’s individual division for years, Mr. Strain says the company really started to crystallize this vision last fall with a series of announcements to its career force aimed at "driving out this idea of holistic advice."

One of the changes it made was to modify qualifications for its sales conference. Starting in 2009 the Sun Life conference will now include wealth sales. Advisors’ 2008 wealth sales statistics will count towards qualification for this conference, instead of insurance sales only.

To recognize advisors who are delivering holistic services, Sun Life will introduce a new award, "Insurance and Investment Advisor of the Year" to be awarded at its sales convention.

Some compensation and bonus schedules for career advisors have also been adjusted to encourage holistic advice, he adds.

The company is also promoting this approach in its wholesale channel by developing sales illustrations that tie wealth management with life insurance products. "Increasingly, whether you’re a career advisor in our Sun Life sales force, or you’re a wholesale advisor, they’re going to be seeing more of this, of holistic advice."

Continual product development

On the product development side, Mr. Strain says Sun Life’s strategy is to continually develop its product line to address holistic needs. "Each and every year I want to see us have at least one new life insurance, one new health product, one new wealth product, one product designed for the mid-market, one for the affluent and one combo product…. We’re looking at it as a suite of products that the advisor can have confidence in as they’re meeting with their customers, that they can meet that holistic set of needs."