The three top companies in segregated fund sales in 2002 were Great-West Life, Sun Life Financial, and Industrial Alliance Life. This is no coincidence, say the companies: it’s a strategic focus on the product through their career agent distribution channels.
At Great-West, Alf Goodall, Vice-President of Marketing, says keeping segregated (seg) funds as a core product line is deliberate and strategic. “We really see it as a differentiated product in the marketplace and I think we have made it compellingly easy for our advisors to provide the products as solutions to clients, and for clients to invest in the product.”
Agents at Great-West are what Mr. Goodall calls “aligned.” “They have a strong affinity to us,” he explains. “They can sell anybody’s product, but they have chosen our product to have a prominent presence on their shelf.” On the other hand, subsidiary London Life has an exclusive distribution force.
“We have seen a very definitive shift in the industry towards vertical integration – manufacturers having access to distribution channels and distribution channels having preferred manufacturers,” continues Mr. Goodall. “It works and it is effective because advisors are trying to make their lives simpler. The only way you can really drive value for the advisor and for the client is in all the coaching, the value-added marketing, and all the kind of tied or aligned services that you can put around that product. That is easier to deliver when your distribution channel is very aligned with your interests.”
Pierre Payeur, Director of Client Services, Investments and Segregated Funds at Industrial Alliance, echoes these sentiments. “Our captive force sells just Industrial Alliance products, while other distribution models use only general distribution channels,” says Mr. Payeur. “Those will offer several products from several companies. When a fund is struggling, it is easy for the broker to get his client out and reinvest it with a different company. The difference with us having a captive force is that, when funds are under performing and the client pressures the agent to withdraw from a fund, that agent might be a bit more patient or might redirect that allocation to another fund within our company. The assets stay with us.”
Another advantage to a captive force is accessibility, says Mr. Goodall, is “when you know the 3,000 people you need to speak to, it is a lot easier to speak to them. If you look at Manulife, it is dealing with mutual fund planners, stockbrokers and insurance reps it could probably talk to 50,000 people. That’s pretty hard to get your message out to those guys, especially when you don’t have any control or ownership in their time. We can get to our folks.”
Industrial Alliance’s national expansion over the past five years has also helped. “In terms of sales in the West, which used to produce low sales proportion, now it is increasing. It is one more contribution to growth in our assets,” says Mr. Payeur.
Manon Desrosiers, Manager for Investor Relations at Industrial Alliance, says the company’s goal is to attain sales levels that exceed the industry average plus five per cent. She says that, in at least the three years Industrial Alliance has been public, it has managed to achieve that goal.
Mr. Payeur adds that, since the company was able beat the average equity returns, it managed to get a better foothold in the seg fund market. Ms. Desrosiers notes that above average results tend to attract new clients and retain existing ones.
Industrial Alliance has a philosophy of value investing, and is known for being more conservative than most, says Mr. Payeur. “It may not have been a popular style back during the technology bubble, but nowadays that’s what people are looking for,” says Ms. Desrosiers.
Net assets fall
The individual seg fund industry as a whole lost 14.9% of assets under management, while the top ten lost an average 15.1%. That led to a small decrease in market share, from 91.9% to 91.7%. This is in addition to losses the previous year when the top ten went from 92.1% to 91.9%.
Based on assets, second and third place Manulife Financial and Maritime Life are sliding away from market leader Great-West. Last year’s seventh place Industrial Alliance leapt forward to fifth place this year, pushing Transamerica Life Canada and Canada Life back to sixth and seventh place respectively.
Mr. Goodall insists that Great-West is not driven by market share numbers. “We certainly have a goal to be a leading provider, however anybody wants to define that. I think what people have to appreciate is that competition is very healthy. I don’t think any company can take its market share leadership lightly, or abuse it. We have a very healthy respect for all of our competitors.”
Mr. Payeur says Industrial Alliance’s advance is not a matter of luck. “Over a period of one, three, five, and ten years, 81% of our client’s assets have seen a performance above the industry average. Obviously that helps our relative performance.”