THREE months into its birth, Manulife Financial Advisers' (Manulife FA) relationship with several industry players has hit a snag, with some questioning its poaching practices.
The Business Times understands ties soured after Manulife FA's aggressive agency buyouts in the past few months even though poaching is common. This is because it is hard to grow an agency, especially organically.
Majority-owned by Canadian insurer Manulife Singapore, Manulife FA has upset potential partners including Zurich Life Insurance (Singapore), Axa Singapore and AIA Singapore, sources close to all four companies said. They added that the three insurers have indicated they will not provide the financial advisory (FA) firm with their products.
The hardest hit was Zurich Life, sources said. It had invested heavily in growing its advisory channel the past two years and now has a team of 180 agents.
The insurer said 12 agents joined Manulife FA in June. It added it has not concluded any distribution agreement with Manulife FA and does not have the intention to do so.
In the past two months or so, less than 10 agents from AIA Singapore left to join Manulife FA. In February, it was a team of about 15 to 20 from Axa Life, individuals close to both insurers said.
AIA Singapore's agency force is the biggest in Singapore at 4,200, while Axa Life's is smaller at 850.
When asked, AIA Singapore said it supports the Life Insurance Association Singapore (LIA) guidance "in adopting sound agency recruitment practices" to protect consumers' interests from movement of agents. Axa's spokesperson could not be reached for comment.
At least one FA firm was not spared. Some 20 PIAS advisers left in the last two months to join Manulife FA, senior executives said.
Manulife FA, one of the biggest here, previously shared plans to double its advisers to 500 in one to two years' time. The longer term plan was to grow the team to 1,000.
Since April, the firm has recruited 31 new representatives. After natural attrition, it now has 257 advisers, excluding those in transition or pending reference checks.
Manulife FA said since its launch, "there has been interest among tied insurance agencies and Licensed Financial Advisers (LFAs) on its innovative business model". The model, it said, provides advisers the chance to offer customers products and financial solutions from a range of providers. "Manulife FA's recruitment practices are no different from the rest of the LFA industry. We follow applicable Monetary Authority of Singapore and LIA guidelines closely."
Said industry longtimer Mark Tay: "Life insurance sales is largely labour-intensive, so the more agents you recruit the more sales you get. In a mature market like Singapore it's very difficult to recruit in significant numbers. There's also a cultural aversion to sales and commission-based jobs so companies resort to poaching."
This aside, industry players have another gripe - buyout packages Manulife FA has been offering to agents and advisers. Such packages are not unseen in the industry but some said they incentivise the advisers to push Manulife products instead of recommending the most suitable ones to clients.
Manulife FA has dismissed this, saying it is committed to putting customers' needs first. "This means that if there is a more suitable product or financial solution from another insurer that meets a customer's needs, Manulife FA representatives can and do recommend the product to the customer."
It is industry knowledge that buyout packages are usually tied to sales targets. Observers said the packages can offer up to 150 per cent of past annual income or higher.
For example, if one earned S$100,000 last year, then the package offers a total salary of S$150,000 or higher, to be paid in tranches. The adviser is to sell an agreed amount of products provided by a specific insurer within a timeframe. Failure to do so results in a claw-back of commission.
"To fulfill this quota, agents may be pressured to resort to more aggressive sales practices and sometimes unethical methods to get more sales," said Mr Tay.
PIAS CEO Christopher Teo said whilst each FA firm has its own business strategy, including recruitment, the ability to earn the trust of any discerning client will ultimately differentiate a highly successful firm from another. "In its effort to raise the overall standards and professionalism within the FA industry, our regulators have introduced FAIR (Financial Advisory Industry Review) and a Balance Scorecard System for all advisers. This helps in levelling the playing field for all FA participants as their respective KPIs (key performance indicators) will essentially be the same."
Pauline Lim, LIA's executive director, said the association is "committed to adopting professional, responsible and ethical recruitment practices". She added "there is also guidance to manage the movement of agents".
"An exercise in futility" is how Mr Tay describes the buyout practice.
"A disadvantage of such a practice is that these agents may not fit into the corporate or agency culture of the company they have joined and when they turn disillusioned, they'll leave again."
Still, life insurance companies persist in it due to pressures from senior executives' demands for yearly increases in topline results, he said.