Last year was a strong one for Canada Life International, what helped drive new business?
Undoubtedly it was driven by a continued focus on our core market.
Some might say that focusing almost entirely on the UK market is a risk.
We’ve assessed this numerous times, as part of formal strategic reviews or through our more regular operational risk reviews, and on each occasion we have concluded that any perceived risk is more than offset by the benefits of such a clear focus.
After serving this market for 27 years, we have a clear understanding of the UK market and we understand what UK advisers want and need from a product provider.
We are also not distracted in any way from trying to serve numerous overseas markets, which can often stretch resources, lead to reduced levels of service and expose the company to entirely new risks, arguably far greater than being focused on one market that we feel we know and serve well. This led to almost £800m of new business last year and a 21% market share.
Are there any areas where sales have fallen this year?
Sales have fallen in the private banking sector of the offshore bond market.
Industry reports suggest banking adviser numbers have fallen by more than 50% in the past three years.
The same organisations have undergone enormous change during that period, with almost every one of our banking partners restructuring in some way.
Prior to the retail distribution review, we felt the banks would be the beneficiaries of the new regulation, with retail advisory firms reducing in number and the banks recruiting orphaned advisers.
The reality appears to have been the opposite. The large discretionary fund management groups seem to have benefited from the temporary distraction within the banking sector. I say ‘temporary’ because we fully expect the banks to refocus on wealth advisory services and once again account for a substantial proportion of the UK offshore bond market looking ahead.
In May last year, Canada Life, supported by its parent company Great-West Lifeco, launched Canada Life International Assurance (CLIA), based in Dublin. Can you explain the reasoning behind this launch and what benefits it brings to your customers?
Our strategic goal is to maintain our position as the provider of choice in the UK offshore bond market, and to achieve this we need to provide advisers and their clients with the broadest range of choice possible.
We already had what we believe to be the widest range of products in the market, covering investment, estate planning and protection solutions, but we lacked being able to offer advisers and their clients a choice of jurisdiction with both of our existing companies – Canada Life International and CLI Institutional – being offered from the Isle of Man.
Some advisers, especially those that use discretionary fund management (DFM) services on an offshore bond, may favour an Irish life company due to the absence of VAT on DFM fees. Others may place more importance on the policyholder protection scheme clarity that comes with a bond through an Isle of Man-based life company.
At Canada Life we are now able to accommodate every aspect of choice an adviser and client must take by offering three different corporate structures across two jurisdictions.
Does having two centres from which to offer offshore bonds cause any confusion from advisers or end-clients?
No, in fact it has added far greater clarity to our overall proposition.
Prior to launching CLIA we were continually being asked to justify why we only offered an Isle of Man-based proposition and/or why we didn’t offer an Irish-based solution given the further tax efficiencies if DFM services are used on the bond.
We also recognised the 27 years of experience we had in administration and investment services on the Isle of Man, and therefore agreed with the Irish regulator to outsource these services within CLIA back to our service company on the Isle of Man.
This means an adviser deals with the same customer services team for all three of our offshore life companies.
During one telephone call the adviser can obtain quotes across three life companies based in two jurisdictions, which has to be more efficient than having to speak to separate companies and call centres.
More generally, has the launch of CLIA been a success? Are advisers using the new option?
Early success has been in the retail space, and sales from this part of the market were broadly as expected since the company’s launch in May 2013.
The lead-in time in the private banking/institutional space is much longer. Any new company must typically go through a rigorous panel approval assessment, and CLIA is no different. Panels also tend to only be reviewed every one to two years, which inevitably means it takes far longer in this part of the market to gain new business traction.
However, our experience to date has shown there is a genuine desire across these firms to consider anything that is new and which can add a tangible benefit to what they can offer their clients. The other outcome we have seen is an increase in sales through our Isle of Man-based companies from firms that, prior to launching CLIA, were closed to us.
CLIA removes the barrier we faced if a firm was wedded to offering an Irish-based solution to the majority of its clients. However, these firms will have clients that place greater value on the Isle of Man as a jurisdiction and, as a result, our Isle of Man companies are picking up these cases simply by us now being able to engage with these new relationships.
Canada Life has decided to continue to pay trail commission on existing policies. Why did you take this route when many of your competitors decided to stop?
We believe we have a contractual and moral obligation to continue to facilitate these payments unless there is a regulatory change that prevents us from doing so. Until that time comes then Canada Life International will continue to pay trail commission on existing policies.
We have been somewhat surprised that companies can simply cease the payments to the adviser while in many cases continuing to deduct the charges from the client’s policy.
I understand the private banking sector is a key focus for you. Do you have any plans to try to increase your market share in this area and, more generally, how do you approach this market?
Our approach to this part of the market is to build strong business to business relationships, starting with the senior management in both organisations, through to our institutional relationships sales team and via our wealth team on the Isle of Man.
We aim to provide a market-leading service to every adviser no matter which part of the market they operate in. But our private banking and institutional relationships require a unique blend of service, and we feel we have got this right over the years.
Our wealth team is dedicated entirely to a relatively small number of key accounts in this space. The members of this separate, dedicated administration team regularly visit their counterparties within our institutional relationships to discuss processes, literature and service, and this has proven one of the main contributors to our high market share from these accounts.
Our institutional relationships sales team is made up of five offshore specialists with 95 years’ collective offshore experience.
While many of our competitors have moved away from having offshore specialists within their sales teams, we continue to recognise the high value our institutional partners place on this.
Are there any new ventures planned for the coming year?
We launched a new estate-planning product at the beginning of the year through CLIA in Ireland. The Wealth
Preservation Europe Account mirrors the product sold through Canada Life International in the Isle of Man, which has seen 40% annual growth over recent years.
The product is particularly attractive through CLIA if discretionary fund management services are used to manage the bond. We are also in the final stages of developing a new offshore protection plan for the UK market.
The product is a non-unit-linked, whole-of-life reviewable contract with guaranteed insurability for life.
The primary market is to cover inheritance tax liabilities and, with its offshore status, it should be particularly attractive to UK residents/non-domiciles that are taxed on a remittance basis.
In 2014, we are also investing further in our online capabilities, with an initial focus on online dealing/ switching with a wider programme of development to follow.