The Independent Financial Brokers of Canada (IFB), an association for financial advisors, says its members are "outraged" by Dundee Wealth Management’s new policy that their advisors put all insurance business through Dundee Insurance Agency Ltd.
John Whaley, executive director of the IFB said the association was alerted to the new policy by the articles published on the subject in the October edition of The Insurance Journal.
In September, Dundee officially informed its network of 1650 advisors that they will no longer be permitted to sell individual insurance products, segregated funds and certain other financial products through outside firms, such as managing general agencies (MGAs). The new policy was set to take effect Jan. 1, 2009. Dundee explained that this is a risk management strategy, since it believes off-book business poses financial and reputational risks.
In early December, the IFB began a survey to gauge its membership's depth of feeling on the issue and other concerns related to advisor independence. After just a few days, the survey had already collected 600 responses from the IFB's members - a "tremendous" number for such early days of a survey, said Mr. Whaley in an interview with The Insurance Journal. He said preliminary results from the survey show that members are strongly against Dundee's plan.
The survey also revealed "an underlying fear" that Dundee's move represents a "disturbing trend" toward the adoption of the MFDA model of regulation, under which mutual fund advisors must put all their business through one dealer. Insurance advisors can put business through multiple MGAs if they wish.
In a press release issued by the IFB on Dec. 3 regarding the survey results, Mr. Whaley said, "IFB has long been vocal in its opposition to the intrusive and prescriptive approach that the MFDA has taken with the mutual fund side of the business; we, and the members we represent, feel strongly that this model has no place in the life insurance industry."
Another concern revealed by the survey is that financial advisors fear that the Dundee model represents a return to the captive agency system, added Mr. Whaley. The vast majority of survey respondents say they do business with at least two MGAs, he added.
The IFB is hoping its efforts to collect independent advisors' views on the issue will discourage other MGAs from following the Dundee model.
Mr. Whaley says that the most surprising result from the survey was that many respondents said that if they were ever forced to choose one MGA, they would quit the business altogether. "This should give MGAs pause before they think of duplicating what Dundee is doing."
In addition, the IFB is gathering the names of MGAs who would like to declare themselves "independence friendly" in a national registry. "Brokers need assurance that their MGA won't try to turn them into captive agents, and they need alternatives if and when that situation does arise," he stated in the press release.