The record 6,500 members of the Million Dollar Round Table (MDRT) gathered at the Anaheim Convention Center this week will, as in past years, be looking for inspiration, techniques and best practices that have enhanced the careers of countless insurance professionals. But to an extraordinary degree this year, one issue beyond the control of attendees will be of particular concern: the growing regulatory restrictions imposed by governments worldwide on advisors’ businesses.
“The top practice management issue for our members today is dealing with compliance,” said Jennifer Borislow, MDRT’s outgoing president. “The regulatory environment is impacting every facet of our businesses– from prospecting and marketing to the client engagement.
“Here in the U.S., just completing a disability income application requires, it seems, 15 signatures from the client,” she added. “The increasing compliance requirements is a universal a concern among our member countries.”
The most prominent and, for less experienced agents, onerous of government restrictions for foreign MDRT members, adds Borislow, are the near-total bans on commissions. In the U.K., all advisors are now to required derive compensation from fees–a requirement that that, by many estimates, has killed off half of the British agent workforce.
Australia, too, has imposed restrictions on commissions. Borislow notes that agents can no longer derive compensation from multiple sources of income. Once an advisor starts charging a fee for managing investments, then commissions on product sales are no longer permitted under “phase two” of Australia’s regulatory regime.
“Agents in Australia and the U.K are facing some very tough restrictions on compensation,” says Scott Brennan, MDRT’s incoming president. “Agents in the U.S. are lucky in that we enjoy, by comparison, little government intervention.
The phase-out of agent commissions, says Borislow, were the driving factor behind MDRT’s decision in 2010 to revise its qualification requirements to permit eligibility based on income, and no longer only on the two traditional methods: commissions and premiums. In 2012, applicants can qualify for membership upon reaching the minimum threshold of $152,000 in annual income (or the U.S. dollar equivalent based on MDRT’s purchasing power parity index).
All well and good. But as Borislow points out, MDRT members overseas are facing mounting government hurdles that circumscribe not only how they can earn a livelihood, but what they can–and cannot– sell. Case in point: India.
Just within the last year, says Borislow, India dropped to fourth place from second in MDRT’s roster of the top 10 countries by membership, having lost roughly half the country’s agent contingent, which now stands at about 3,200.
The reason for the loss: a new regulation imposed the by New Delhi that prohibits the sale of indexed universal insurance: products that, based on a complex formula, capture a percentage of stock market gains while also offering protection of principal during market slides.
“Overnight, that rule has put a lot of Indian producers out of business,” said Borislow. “The regulatory environment there is so volatile–the new regulation literally wiped out 50% of the country’s membership. The Indian producers still with us really struggled with the new regime.”
The growing regulatory burdens on producers have not, however, contained MDRT’s ability to grow. Indeed, the association for top-producing life insurance professionals, founded in 1927, now boasts more than 37,400 members across 76 countries–up from 35,908 in 2011–the highest number in the 85-year-old organization’s history. Among these producers: 5,059 Court of the Table and 1,771 Top of the Table members, who generate the highest production levels among the rank-and-file ($534,000 and $1,068,000, respectively, in eligible premiums for the two groups).
U.S. members, who numbered 10,252 last year, still constitute the largest contingent. But a growing number of top producers–two-thirds of the rank-and-file–hail from outside the U.S.
As in past years, Asian producers occupy the top 10 countries by membership. In 2011, these included India (6,126 members before the downsizing); South Korea (4,513), Japan (3,368), Hong Kong (2,301) and China (1,631).
A key attraction for many of these far-flung agents, says Borislow, are the practice management techniques essential to building and maintaining a successful life insurance business; and to phasing one out. Hence, the growing demand among advisors worldwide for business continuation or exit planning strategies.
The issue is particularly pronounced in mature markets where the average age of life insurance professionals is in the mid-50s (55 in the U.S.). And it’s squarely in this age bracket when producers need to start thinking about the transition from work to retirement.
To help ease the transition, says Borislow, MDRT this past year kick-started a Business Continuation Task Force to explore ways to facilitate a hand-off to a successor advisor. The task force will offer guidance, for example, on how to buy and sell one’s practice; and how to mentor young proteges who, working within the firm of the of retiring advisor, are groomed to assume responsibility for the advisor’s clientele.
The work of the task force will thus overlap with a long-standing project of MDRT: to establish teams of mentors and “aspirants” (mentored agents) among MDRT’s members. These pairings currently number more than 2,500 worldwide.