Manulife to shut down Equinox

Manulife Financial has opted to wind down the operations of Equinox Financial Services, an independent support network for managing general agencies and their advisors.

“Although Equinox sales results for 2005 were extremely positive, a number of factors led the [Equinox] board to this conclusion, including their long-term financial projections, management and financial commitment required to grow the business, changes in the MGA marketplace, and an evolving business philosophy,” reads an internal e-mail obtained by Advisor.ca and signed by Phil Walton, senior vice president, distribution for Manulife Financial.

Manulife acquired Equinox as a result of the John Hancock/Maritime Life merger, after which Manulife acquired Hancock. While owned by Manulife, Equinox also provides its approximately 30 affiliated managing general agencies and their 3,500 insurance advisors with access to products from AIG Insurance, RBC Insurance and Standard Life.

“The independent marketing centres (MGAs) and their advisors will remain our valued customers as they transition to new relationships with Manulife,” Walton said. “Our mutual objective with the Equinox team is to continue to promote the sale of Manulife products throughout the transition and beyond.”

The wind-down of operations will take place in stages throughout 2006 and 2007. In the e-mail, Walton assured MGAs there will be little change to their operations before the end of the year, and that the incentive conference in Las Vegas will go ahead in April 2007.

“We’re quite large ourselves — Equinox is just a portion of our business,” says Ian MacLean, vice president, marketing and compliance for Vancouver’s Customplan Financial Advisors, an independent agency which deals with Equinox. “There are smaller marketing centres that would not qualify based upon their volume of production to have direct contracts with many of the carriers, so Equinox is going to put a transition in place to get them subcontracts through larger MGAs.”

“The advantage of Equinox was that it was one contract for four carriers,” he says.

Another possible result, though, could be that the wind-up will spark consolidation in the industry, as smaller MGAs struggle to maintain scale.

“It makes it tougher for the medium and small MGAs to be successful,” says Byren Innes, senior vice president and director of NewLink Group. “One of the things that Equinox did really well was provide shared services that were needed by the distributor, which if they aren’t a reasonable size, they just can’t afford.”

Services such as product research, conferences and back office technology do not come cheap, he says, and with the demise of Equinox, many of their affiliates will not be able to foot the bill.

Getting these services from another entity could further squeeze margins, making it harder for the smaller MGAs to retain advisors, as they are forced to pare back compensation.

“Manulife has stated publicly that its goal is to have about 30 large MGAs,” Innes says. Such a strategy would effectively lock the smaller MGAs out of selling product from the country’s largest insurer.

“The status quo is no longer an option,” Innes says. “I think there will be some mergers and acquisitions.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com