Empire Life names

Size is usually the scale by which most empires are measured, but Les Herr, recently named the next president and CEO of Empire Life Insurance, plans to expand his company’s brand by continuing to build a loyal network of independent advisors who believe being the biggest isn’t necessarily best.

Consolidation of Canada’s insurance companies hasn’t been the most positive development for Canada’s insurance advisors, but it has allowed some of the industry’s mid-size players to thrive as alternatives to the industry giants. According to Herr, who will succeed current CEO Douglas Hogeboom in April, Empire Life is one such alternative.

“We’ve been getting our growth as a result of the consolidation that has occurred. As the marketplace consolidated over the last five years, we did a lot of the right things, and we were able to grow our business,” he says.

A 25-year veteran of the insurance industry, Herr has held a number of positions with the company since he joined in 1999 — most recently that of senior vice-president of individual products. While he’s been there, Empire has been able to build its distribution network by fostering close relationships with independent advisors, which he says is not possible for his larger competitors. He believes ultimately this will position the company as the premier mid-size insurer in Canada.

“There are four fairly significant publicly traded insurance companies in Canada,” he says. “I see the mid-size players as those that come right after those top four. We see ourselves right now as the number one mid-size player, and we want to stay there.”

Herr outlines two areas Empire Life will need to focus on to maintain and grow this position. First is improving its technology, which would allow the firm to compete with the scale of the big insurers without sacrificing its advisor-focused approach.

“We may be able to move faster. I think technology is a very important enabler for Empire Life going forward. That’s an area that I’ll be very focused on for the next three to five years,” he says. “Enhancing our technology will allow us to be the number one mid-size player and to be competitive with the big players.”

The second area is helping their aging distribution network renew itself, a task he recognizes as difficult but also of extreme importance. Herr says insurers have the ideal product solutions for boomers and retirees, because they specialize in providing capital accumulation and wealth preservation. This will bring them great success in the near term, but ultimately there will have to be a transfer within the advisory channel, and the industry is not replenishing its ranks.

This concern is twofold. Empire relies on independent advisor distribution, and as this channel reaches retirement it creates fewer distribution outlets. Also, many of these advisors already have full client books, so they don’t have room to service younger and more middle-income demographics Herr believes will be the main drivers of growth over the long term.

“The current group of financial advisors out there tends to be in that baby boomer group themselves, and they have a good group of clients who have accumulated wealth,” he says. “Those advisors will go with them into retirement and help them with financial advice to turn their capital into income, to preserve wealth and to minimize taxes and maximize their estates. We’ll continue to work with them and support them in that area.”

Herr acknowledges that the boomer market is huge — about 10 million Canadians are in or near this demographic — but that still leaves two-thirds of the Canadian marketplace wide open.

Empire has been proactive in trying to help aging advisors with succession planning to bring in new advisors who can lay the foundation to serve demographics other than the boomers.

“We are a sponsor of Seneca College’s Centre for Financial Services, and we have provided additional support to quite a number of MGAs to help them bring on additional people,” he says. “It has been slow, but there’s been quite a bit of progress. Anybody who is working with independent financial advisors is going to want to step up and find ways to bring new people to the business.”

Herr warns that if companies that rely on independent advisors don’t step in to help, then the industry is essentially being handed away to the large financial institutions, like the banks, which have made a concerted effort to court middle-income and younger clients using their in-house sales force.

Companies like Freedom 55, Clarica and Industrial Alliance have retained a career sales force, but Herr believes the industry as a whole needs to show young people the rewarding career that can be had in financial services. Herr himself started in the business fresh out of university.

“The image of the business today has never been better. When you think about what Advocis and the Independent Financial Brokers have done, what the Canadian Health and Life Insurance Association has done, and all these professional associations and companies and individual advisors have done — they have all improved the way we do business. I think it’s one of the best businesses for a young person to come into that there is,” he says. “I started in the business 25 years ago, and I’ve enjoyed great success. I believe we need to tell that story that we used to tell in the old days, about how great this business is.”

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com

(12/20/07)

Mark Noble