What should an advisor look for in an MGA?

Business Meeting

As the distribution channel adapts to a business environment in transformation, what should advisors seeking a new MGA relationship look for? The Insurance and Investment Journal asked some of Canada’s leading managing general agencies this question.

For Jim Virtue, president and CEO of PPI Solutions, the most important thing to find out is whether an MGA can “help the advisor build their business and better serve their clients.”

He suggests that advisors interview several MGAs before picking one. They should ask about the tools and capabilities the firm offers to support their advisors’ business growth.

As an example, Virtue says one of the ways PPI Solutions does this is by providing advisors with access to expertise. This includes professional expertise from lawyers and accountants, as well as training opportunities such as symposiums and webinars. It has also recently published a 27-page reference document to explain tax issues related to life insurance.

Also aimed at helping advisors grow their businesses, PPI Solutions has been running a business succession course and has recently launched an online service called MatchBook to link advisors in the PPI network who are interested in buying or selling a practice.

It has also recently entered into a relationship with Wealthbar to provide its advisors with a robo-advice platform that they can offer their clients. “The interest has been huge,” says Virtue.

Regulatory changes

Terri Botosan, president of HUB Financial, recommends advisors choose an MGA that “stays connected and involved in the industry, both from a carrier connection perspective and from the perspective of regulatory changes and technology changes.”

Years ago, an advisor would have looked primarily for “access to different or new products and competitive compensation,” she recalls. Now she finds they are looking for more, including “a team that mirrors their values” and various kinds of support such as product knowledge, best practices and compliance support. Help with compliance is particularly important with mounting regulatory requirements for advisors to navigate.

Botosan suggests that advisors look for an MGA that has a cooperative approach to compliance. This means helping advisors “be as effective as they can, while adhering to all the regulations they need to be aware of,” she says.

With discussion in the industry of establishing a framework that would allow increased advisor oversight (See article, pages 22-23), she says further change is likely coming to the distribution channel landscape. If this happens, Botosan says choosing the right MGA will become even more important than ever.

Paul Brown, chairman and CEO of IDC WIN, also points to an MGA’s ability to help advisors ensure their practices are compliant from a regulatory perspective, respecting privacy laws and anti-money laundering rules for example. “There’s starting to be a lot of activity at the regulatory level with advisors being audited and having to have their ducks in a row…”

Advisors “are now under the microscope,” whereas five years ago this was not the case, he says. Helping them prepare for compliance audits is an area where an MGA can bring value. “Recently we had some advisors who had been informed by insurance companies that they’re going to be audited and we are prepared, to the extent possible, to help those advisors prepare for that.”

Referring to the trend of insurers been buying up distribution – such as the purchase of Financial Horizons Group by Great-West Life last May, or iA Financial Group’s multiple acquisitions – Brown suggests some advisors may be interested in MGAs which are maintaining their independence.

“I think it creates an opportunity for firms like ours…I think advisors are going to be more prone to want to deal with an independent distributor versus a distributor that’s controlled by an insurance company.”

Kevin Cott, president of Qualified Financial Services (QFS), says he thinks advisors should be give consideration to an MGA’s ownership structure.

Cott considers that of the larger MGAs, QFS is the only independently owned firm. “You’re talking to the guy who makes every decision, that is able to change direction, that is able to do whatever we want to do because we have no board of directors. Our ownership is not at a level above us with a venture capital firm, or public company, or third party in any form whatsoever. “

Cott suggests that an advisor should ask themselves three questions when choosing an MGA: “How are decisions being made that affect me? Whose interests are those decisions being made for, with whom in mind? What is the succession plan of this firm? Who’s going to be there tomorrow under circumstances of death, disability or retirement ?”

In the case of QFS, his succession plan is already clear. Three of his children are working with the firm and will take over from him when he is ready to leave, he says.

He adds that it is important from the advisors’ perspective to know the MGA is run by a human being who actually cares. “Am I important to that person – not the organization – the person,” says Cott.

With respect to the current trend of some companies buying up distribution, Cott also sees it an advantage for MGAs which are independently owned and large enough “to stand on their own two feet. There are many advisors who don’t want to stay with MGAs who have been acquired by insurance companies, he says. “They’ve already come to us.”