The Continuing Evolution of Challenges Robert Frances, President & CEO, PEAK Financial Group June 7, 2012
Dec 29, 2015
The Continuing Evolution of Challenges
Robert Frances, President & CEO, PEAK Financial GroupJune 7, 2012
Compliance and regulation of MGAs/advisors Technology Competition and consolidation Succession Profitability
Trends and Issues
Growing demand Many distributors Volume based incentives (bonuses, contests) Little regulation of the distributor Paper based Lack of central processing between suppliers Domination of large suppliers vs smaller distributors Increase in compliance costs
Industry snapshot
Mutual Fund Industry Evolution What were the catalysts to change Areas of possible change for the insurance industry
Agenda
Changes – David Bowie
Suppliers/distributors Competition Regulation Technology Customers
Mutual Funds Industry 1992
What a Wonderful World – Louis Armstrong
Rapid growth, doubled since 1992 Dropping interest rates, high returns, ease of sales process Industry attracting regulators Risks and cases of losses
Mutual Funds Industry 1995
Catalysts for change:
insular competition
scandals
increase in awareness and demand
regulators worried
What happenned
Key issues raised: conflict of interest sales practices regulation Risks
Stromberg Report - 1995
Let it Be - Beatles
“It’s the end of the world” “This will never happen” “I don’t care” “The regulators don’t understand this industry”
Industry spent time on this rather than building its coalition and response
Players
Little impact anticipated Some provinces began to consider changes IFIC – Sales Code
Industry reaction
You ain’t seen nothing yet - BTO
Industry not taking issues seriously Sweeping changes recommended
Stromberg Report 2 - 1998
Suspicious Minds – Elvis Presley
Within 12 months – MFDA Sales practices Capital requirements and financial reporting Books and records, KYC
Regulation – 0 to 60 in 2.4s
Dazed and Confused – Led Zeppelin
MFDA initial audits Compliance infractions, reports Fines and enforcement With every client loss - Opportunities for regulation
The perfect Storm
Killing Me Softly – Roberta Flack
Decreasing number of players Decrease in new entrants Increase in regulatory, compliance, technology costs Increase in consolidation activity
The Result
Crying – Roy Orbison
Dealers - proactive Work with regulators Self regulatory organization Supplier – distributor solution
Hindsight
Life Insurance Sales Code Single MGA per advisor Value based growth vs. consolidation Capital requirements and contingency fund
Options
Change is inevitable; misery is an option.
Yesterday - Beatles
Come Together - Beatles
Taking Care of Business – BTO
I will Survive – Gloria Gaynor
I’m Winning - Santana
Conclusion