Q&A
Gil McGowan President and CEO BENEFITS ALLIANCE
Years in the industry: 35 Career highlight: As Mackenzie Investments’ senior vice president of national sales, McGowan doubled the in-force group retirement plans from 1,800 to more than 3,500 in five years; assets under management increased from $350 million to more than $1 billion in the same period
The ORPP threat to advisors What were your thoughts on the Liberals’ recent announcement on the details of the ORPP?
The federal government has refused to cooperate with Ontario and contribute. Where does that leave the plan going forward?
I don’t think we were happy with the government’s decision in the first place, but including defined contribution pension plans at least gives us a chance to go to our clients and give them an alternative to the ORPP. It forces clients to decide, “Do I want to deal with the government’s ORPP and explain that to them, or do we have this alternative that we can put in a Registered Pension Plan with one of our major suppliers?” It’s turning lemons into lemonade. I can say all kinds of things about how the government should have worked to implement something with existing private pension plans and retirement saving systems, and how they could have eliminated payroll taxes on employer contributions to RRSP. I think there’s going to be a loss of jobs with the implementation of the ORPP within the insurance companies who are doing a lot of group RRSPs. Maybe companies are just going to say, “We’re not doing anything now.” What’s going to happen to those plans from insurance companies and investment firms and banks and credit unions … for advisors, brokers, consultants who really zeroed in on group RRSPs? So it’s a really big risk from a job perspective.
It leaves it in limbo. It increases the cost. It costs about $800 million a year to administer the CPP. Wynne was asked at one point how much this is going to cost, and she said, “We haven’t worked that out yet.” I think the jury is still out. We’ll see how the election plays out in October … if there is a change in parties, we might see a change in this whole initiative of the ORPP.
Young workers want no part of insurance
AM Best’s latest quarterly report on the insurance industry is critical of the sector’s recruiting efforts among young Canadians – a failure that could have long-term ramifications. According to the credit rating agency’s survey, less than 20% of advisors in the US are 44 years of age or younger. Even more damaging to the industry’s brand is that 63% of life advisors are over the age of 50, according to the findings. The reasons run the gamut, from life insurance being ‘too boring’ to lacking diversity to not being entrepreneurial enough.
If implemented, how will the ORPP affect advisors? It will affect them if companies say, “Hey, I’m not going to do anything.” There was a report that said 56% of clients may consider eliminating their group RRSP if the ORPP is implemented. It could affect the business of advisors. They could lose those clients, and then what happens to those plans? They get wound up, and the assets have to be moved around or transferred out. It does cause a lot of turmoil in the industry, like spinning your wheels a little bit. And there will be a loss of revenue because there are no more contributions, and the advisors in this business generate revenue and income from commissions and trailers from assets under management. So those assets will not increase anymore, and then they’ll see their income drop.
Canadians uninformed about healthcare costs
Research from Sun Life points to the lingering disconnect among Canadians about the true cost of healthcare and what is and isn’t covered by provincial plans. “Our research revealed that a large majority of Canadians are not aware that not everything is covered by their provincial health insurance,” said Brigitte Parent, senior vice president of individual insurance and wealth with Sun Life Financial Canada. “Canada’s health insurance system was set up to respond to people’s need for it, rather than their ability to pay for it.”
Desjardins billiondollar bet on State Farm paying off
After two quarters with State Farm’s Canadian operations on the books, Desjardins says the results so far are exactly what they were hoping for. In the second quarter of 2015, Desjardins’ wealth management and life and health segment business generated $134 million in surplus earnings. Desjardins’ overall surplus earnings were $629 million, 41% higher year-over-year. Of the $183 million increase in surplus earnings, $130 million is attributable to State Farm. The deal also made Desjardins’ P&C segment the second-largest insurer in the space. www.lifehealthpro.ca
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