Fee Disclosure and the CLHIA

Benefits Canada: Advisors need a ‘strong voice’ in CLHIA’s compensation disclosure discussion

Fee Disclosure is a tenuous subject. The article referenced here suggests that advisor’s need a strong voice in discussions with the CLHIA. I would go a step further and suggest that while this is true, the CLHIA needs to have an open mind and ear available for that voice. At recent information meetings regarding the G19 member insurers hinted that the guideline was unlikely to change. Shouldn’t you have hearings to discuss before you etch something in stone and ask for input. How very Bill Morneau of them.

The meeting I attended had a good cross section of representatives of insurers, MGA/TPA’s, agencies and advisors. A few points I gathered from the discussions resonated across most of the room. First, the insurers insist they are trying to get ahead of things before regulators make them do so. With CRM as an example in the investment world wouldn’t it be safe to say there’s no rush, G19 doesn’t certainly propose less than what a regulator would require. Secondly, insurers want to provide clients with what advisors earn but seem hesitant to provide things like profit margins on large amount pooling and clarity on what their profit level is of their TLR/IBNR combination. If clarity is the goal here why are we only looking at the advisor piece?

No client believes their advisor works for free. Clients also understand that for profit providers have shareholders expecting some return on investment. Many advisors disclose the percentage they earn up front and are already required to disclose if they participate in any bonus or incentive programs with the providers they work with. I did not hear a single advisor saying they did not want to have disclosure. What they want is a fair playing field as to how that will look. Force-feeding a manual dollar amount from the insurer to the listed contact up front each year is a terrible solution. Not only is there no way to quantify that accurately as firms often change size, merge or go out of business (advisor chargeback) but you can’t know if an advisor will hit a persistency or volume bonus by guesswork. Having the advisor meet with their contact and have a signed disclosure of compensation percentages seem to be a more reasonable solution.

In addition, the group retirement piece is being lumped in with the group benefit part of the business. No one doubts that legislation for the GRS side of the business as client trust monies being managed is here and should be similar to things like CRM but the group benefits world is much different. The reality is these business models should be separated as they represent completely different structures. The service models and fee structures are significantly different. Let’s hope the CLHIA will have an open mind and listen to the suggestions of their industry partners. There are way too many variables to have specific dates and measures in place until we can be sure  the playing fields will be similar and the technology can provide equivalent results in reporting.

Ultimately with retirement solutions there is already a roadmap with CRM to follow and this should be very straight forward and carry more urgency. With benefits there is more to be discussed to make this be reasonable and properly represent to clients what the value proposition is they receive for the compensation their advisors provide. Our own business lives in both worlds yet we simply don’t treat the 2 the same way as they are distinct. Let’s hope the CLHIA also comes to that conclusion. 

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