G19 May be Dead but Transparency is Alive and Well at ZLC Financial
Back at the beginning of 2018 the Canadian Life Health and Insurance Agency (“CLHIA”) started to work with Canadian insurers on an initiative for full transparency around compensation paid to group insurance advisors, collectively called “G19”. Up until last week the target timeline was for disclosure for group retirement services was to start in 2019 and was to start for group benefits services in 2021. And then, the unexpected happened and the CLHIA scrapped the G19 guideline last Friday. So what happened here and what does it mean to group benefits plan sponsors?
When you trace this back to 2005, the CLHIA encouraged advisors (also referred to as Consultants, Brokers, etc.) to voluntarily disclose several items to clients in the interest of greater transparency, including the nature and form of commission compensation. Move forward about 14 years and, based on our experience in the market, we would estimate that unfortunately full transparency in the marketplace was not always the norm. Perhaps it is no surprise, given those results, that the CLHIA chose to “toughen up” the standards and work with the insurance industry instead of advisors to make it happen.
The initial G19 proposal back in 2018 was essentially that Canadian insurers would disclose directly to policyholders the nature and amount of compensation paid to the advisors related to the policyholder. It would then be up to advisors to reconcile and/or verify those amounts and tie them into the advisory services that are provided to their clients. Sounds simple enough?
We agreed that there were some issues that needed to be worked on with respect to G19 but conceptually we agreed with the guidelines and fully support transparency in all our client relationships. However, many other advisors in the business surprisingly did not seem to be as supportive of such an initiative. Many in fact resisted the G19 idea with working groups pushing back and moving back the implementation date. The goal of the anti-G19 group of advisors was to oppose G19 in its current format through a multi-faceted lobby approach in light of what they felt were the numerous shortcomings it represents. I guess we can say, mission accomplished.
At ZLC Financial, we went in a different direction as we did not agree with the work of the anti-G19 advisors group. Even though there were issues with the working guidelines of the G19 proposal, the spirit was sound – full disclosure of the compensation paid to advisors. We believe in full transparency and felt that this disclosure also made the most sense being presented in the context of advisor services provided so that our clients could assess our “value add”. So in the Fall of 2018 we made the decision to take our disclosure to the next level for all group benefits renewals and adopt the spirit of the proposed 2021 G19 guidelines but starting Jan 1/19. The feedback from our clients has been great so far and we will continue on even though the formal G19 initiative has been terminated. Each of our group benefits clients knows the nature of compensation paid to us and the estimated annual amount and it is formally detailed in our annual employee benefits renewal report.
At ZLC Financial, we understand that no two clients are the same and, as we develop relationships with our clients, we tailor our services and our compensation to best suit our clients’ needs. Our compensation arrangements are based upon the scope of services provided and is fully negotiable with our clients.
So these latest developments are significant for the group benefits industry but ZLC is largely unaffected. We believe in abiding by the “spirit of the law” rather than the letter of the law relating to the G19 guideline, and we will continue to provide transparency to our clients as we have always done. We believe in the highest level of service and want all our clients to see value in our services and fairness in our compensation. Simple enough!
By Dan Eisner and John Lutrin
This information is designed to educate and inform you of strategies and products currently available. As each individual’s circumstances differ, it is important to review the suitability of these concepts for your particular needs with a qualified advisor.