From Quantity to Quality The Sales Agent in a Mature Market

1. From Quantity to QualityThe Sales Agent in a Mature Market Michael Elliott LIMRA Senior Regional Executive, United Kingdom and Ireland Italian – Milan 2012

2. From Quantity to Quality LIMRA’s Market Maturity Model shows where the industry came from, where it is today, and where it is going in the future….

3. From Quantity to Quality Agent or Advisor Administrative Staff Yesterday’s Agency “Yesterday’s agencies were built around recruiting to a solo practice.” ‘New Games, New Rules: New Reality’ by LIMRA & Moss Adams Yesterday 3

4. From Quantity to Quality Today’s Agency “Today, the economies of scale enjoyed by consolidating sales offices into very large mega-offices has reached the point of diminishing returns.” ‘Leading Indicators’ by LIMRA Today 4

5. From Quantity to Quality Tomorrow’s Agency “Tomorrow’s agencies will be built around collaborating teams” ‘Forces of Change: Issue Facing Distribution Leaders’ by LIMRA and McKinsey & Company Tomorrow 5

6. From Quantity to Quality • Two kinds of Agent are emerging: • A Traditional Agent = Protection and Savings; • A Contemporary Agent = Consultation Specialist ‘Forces of Change: Issues Facing Distribution Leaders’ by LIMRA and McKinsey & Company   6

7. From Quantity to Quality The Modern Financial Planner • Educated to degree level and has professional financial services qualifications; • Likely to be paid by fees or a combination of fees and commission; • Prioritises financial advice over selling; • Is provided with a knowledge of investment strategies; • Is likely to have a career path beginning with a tied agency to gain experience.

8. From Quantity to Quality The Modern Financial Planner does … • Assessments:a listof outgoings and incomings; • Goal Setting:financial goals help direct financial planning; • Plan Creation: the financial plan details how to accomplish clients’ goals; • Execution: may involve assistance from other professionals such as accountants, investment advisers and lawyers; • Monitoring and reassessment: for adjustments to goals, new life events, changes in incomings and outgoings.

9. From Quantity to Quality A Day in the Life On a typical day a financial planner's tasks might include: • Marketing his or her services to potential clients by giving seminars or networking; • Meeting with clients to assess their financial needs and goals; • Updating clients on potential investments; • Adjusting clients' financial plans to accommodate life changes such as marriage, divorce, disability or death of a spouse.

10. From Quantity to Quality Europe – leading the drive to higher standards • Czech Republic on course to certify first European Financial Planning Association qualified advisors; • European Commission – Markets in Financial Instruments Directive (MiFID) II proposals will ban commission for independent financial advisors and provide greater transparency in advisor/client relationships; • UK’s FSA will ban commission for all financial advisors and raise standards by exams.

11. From Quantity to Quality The demand for financial advice can only grow Source: LIMRA 2009 Industry Predictions

12. From Quantity to Quality Moving away from commission-based selling • Danger of commission-driven salespersons selling products without regard to their suitability for the client; • Scandals involving unsuitable products sold on commission in Australia, India, the Netherlands, South Africa and the UK.

13. From Quantity to Quality UK - Retail Distribution Review (RDR) Launched by the FSA in June 2006 to address persistent problems in the regulation of financial services. Comes into force 2012; Insufficient consumer trust and confidence in the products and services supplied by the market lie at the root of what the RDR seeks to address.

14. From Quantity to Quality Retail Distribution Review • Two main levels of advice: independent and restricted. Non-advised services, including execution only, will still be allowed; • Commission for financial advice on investment products to be banned from 2013; • Investors to be told how much advice is going to cost and how they will pay for it; • All investment advisers to be qualified to a new, higher level, equivalent to the first year of a degree course.

15. From Quantity to Quality Measures fundamental to desired RDR outcomes: Improve the clarity with which firms describe their services to consumers; Address the potential for adviser remuneration to distort consumer outcome by ending commission-based payment; Increase the professional standards of financial advisers by examination.

16. From Quantity to Quality Professional Qualifications • The Retail Distribution Review is designed to create a framework that will make individual investment advisers more personally accountable for their knowledge, skills, and professional conduct.

17. From Quantity to Quality What will be the effect of ending commission in the UK? • A growth in the market for non-intermediated sales of simple investment products; • Loss of commission stream may translate into fewer opportunities to help those on modest incomes; • Growth of bancassurance, direct and worksite marketing; • ‘Simplified advice’ could be increasingly important for the mass market.

18. From Quantity to Quality Solvency II • The new solvency regime for all EU insurers, coming into force in 2012. Applies to all insurance firms with gross premium income exceeding €5m or gross technical provisions in excess of €25m; • Aims to implement solvency requirements that better reflect the risks that companies face, and deliver a supervisory system consistent across all member states.

19. From Quantity to Quality Solvency II - Opportunities • More effective risk analysis could help firms offer keener prices on particular products, carving out a market niche or forcing less adaptable competitors to withdraw; • Exiting from certain business lines would release resources for more profitable products; • Companies with Agency sales forces will find enforcing compliance easier; • Providers can dictate which products the sales force will sell, minimising the impact on withdrawal of product to cope with Solvency II.

20. From Quantity to Quality Learn from the past to influence the future