The public company two-step, a balancing act weighing shareholder benefits against consumer and distributor demand, is seldom more evident than when companies like Manulife Financial discuss strategy for the benefit of investors.At the recent CIBC 13th Annual Eastern Institutional Investor Conference, held in Montreal, Marianne Harrison, senior executive vice president and general manager of Manulife Financial Corporation’s Canadian division, answered questions about the company’s recent acquisition of Standard Life plc’s Canadian operations and plans for the company’s presence in Quebec. Harrison also discussed the need for simplicity and innovation in product development, and briefly mentioned Manulife’s plans for helping distribution partners – independent advisors in particular – to manage regulatory reform going forward.
The coming disclosure of fees, in particular, will likely have an impact on sales in the future, but Harrison says she expects the effect will be limited. To help with the transition, the company plans to import training used in the United States, to help advisors understand fee transparency, and ways to effectively manage that transition with clients.
“The U.S. has gone through this. We’re basically taking the program they used, and bringing it to Canada,” she says. “We do think it will have an impact from a sales perspective, but it’ll be in a limited period, as we get through this. We expect to see a slowdown, but (fee transparency) will become the new norm, and people will get through it.”
In discussing different distribution models, she says the independent advisor channel continues to work well for the company. At the same time, she says there are large portions of the population looking for a different way to transact. “Today, we don’t get to them because we don’t have that direct sales force. We’re trying to figure out what the right model is, and what it looks like going forward.”
As for product development, Harrison says the objective of the day is to create products that are simple, and easier for the end user to understand.
Participating (par) insurance is on the company’s radar as well. Given recent and current demand, she agrees having a par product in Manulife’s lineup could be helpful from a defensive point of view – a view the company is considering at the moment – but adds the return to shareholders is not sufficient enough to make it an overly attractive option. “I would not want to sell a lot of it, because of the returns from a shareholder perspective.”
Synergies and savings
Its plans for Standard Life, meanwhile, call for the usual effort to find synergies and savings as the two companies come together. Manulife says it expects to realize annual cost savings of $100-million, within three years.
In working to realize those savings, Harrison echoes earlier company statements about the importance of Standard Life’s presence in Quebec. She says the company had been discussing ways to build that presence on its own, for some time before the Standard Life opportunity presented itself.
“Does that mean I’m not going to cut as many positions as I need in order to achieve synergies? No. We’ll find positions somewhere in the organization. Even attrition alone will help us in that respect. If we have attrition in the Kitchener-Waterloo area, do we have the opportunity to build expertise in Quebec? We want to have professional roles here in Quebec,” she adds. “We don’t want it to just be an operations shop. It’s important for us to build up that presence here.”
Although the deal cost $4-billion, she also says it does not mean the company plans to sit on the sidelines, or forgo future acquisition opportunities. “We have excess capital. We’ve put some of our excess capital to work with this acquisition, but it’s a Canadian integration – it doesn’t take the resources that would be necessary to do acquisitions in other parts of the organization. Four billion dollars is not inexpensive, but it does not preclude us from doing another acquisition in other parts of the world.”