Tony Parry, managing director of Canada Life International, talks to Sarah Godfrey
- What is your view of the US and UK banking bailouts?
I support the way Gordon Brown has intervened and supported the banks - they have been struggling to find a way forward, and his capital injection allowed them to free up assets and lend again. But the terms of the deal mean ordinary shareholders will suffer, and a lot of those will be pension funds and small investors. So it's a bit of a double whammy for the shareholders, who are also taxpayers.
The intervention is to safeguard the interests of the financial system - world governments had to step in and I'm not convinced we have seen the end yet; there may be more casualties. But government guarantees are only as good as government assets - Iceland nationalised its banks but they still collapsed as it couldn't support them.
- Is the offshore life industry to any extent insulated from the effects of the financial turmoil?
No, we're feeling it as well. In a lot of the markets we operate in, we are looking at investors who, when markets are in turmoil, tend to run for cover and look for a safe haven. That safe haven has traditionally been cash, but now there are questions over the banks. What we do with offshore life wrappers is to provide tax-efficient solutions for people's investment objectives - we're basically an administrative function that allows people who want to invest to get tax benefits. But when markets are in trouble, people don't do anything - they put their heads in the sand. At the moment, with markets where they are, I would think it's a good time to go back in, and using an offshore wrapper would be a great solution if markets do recover, as the gains roll up in the life wrapper and are not subject to CGT.
- How broad is your geographical focus, and is that set to change?
The focus within Canada Life International is primarily the UK, including the Channel Islands and the Isle of Man. We have no immediate plans to change that. We spent a lot of time, effort and money looking at different markets but we came back to the fact that we feel we have only scratched the surface of what we can do in the UK.
In the UK IFA market the top 1,000 advisers are doing 60% of the business, the next 2,000 are doing 30% and the remainder pick up the last 10%. Our focus has got to be on the top 2,500-3,000. At the moment, we are only dealing with 10-15% of that segment on a regular basis. Our total IFA base numbers about 2,000 but some of them only use us for one case a year. We want to get two elements right: increasing the 'share of wallet' we get from the IFAs we deal with and also increasing the number we deal with on a regular basis.
We keep up to date with international markets, but our concern is that at the moment, a lot of the international markets are very similar to what the UK was like in the 1980s - there's regulation there but the products that are being sold are not customer-friendly; they are heavily geared towards paying commission. Canada Life would try to do something more transparent and in favour of the policyholder.
- Has demand for offshore products been affected by changes to the UK capital gains tax regime?
Initially, yes - when the announcement was made last October there was an immediate impact on investments into both offshore and onshore bonds. The ABI and Ailo lobbied the Government, and the feedback they got was that the Government hadn't really considered the impact of the tax change on insurance companies. As a result of the lobbying, Alastair Darling announced he would have a rethink. In the market we operate in, we deal very much at the higher end of the investment scale, and the last thing those customers want is uncertainty. Business reduced quite significantly, both in the last two months of 2007 and the first few months of 2008. Once the Budget reconfirmed what was in the PBR, matters became clearer and we could start to address the issue, and once certainty was back in the market, business picked up significantly.
We reduced our targets for the first couple of months, but for the rest of the year we are not just on target but beating our targets on single premium products. So Government reports and Budgets are fine as long as they don't produce uncertainty - it's the uncertainty that upsets people, not the change.
- What is your best-selling product and who is buying it?
Dimensions Preference - a new product we launched about the time of the PBR. Because of that, it struggled in its first few months. But it has unique selling points - there are a number of different charging options; it can invest through Cofunds into all the 1,500 or so funds on the platform; and we've developed an automated process with Cofunds to allocate the rebates we get back from the platform to either the policyholder or the adviser.
People use the product for the tax planning advantages of the wrapper, but quite a few are just using it as a packaged product to get into the investment market on very competitive terms. As an individual investor, if I wanted to access half a dozen funds directly, I couldn't do it on the terms Canada Life can, and I certainly wouldn't be able to get the rebates.
- Is it helpful in the current financial climate to have a parent listed in Canada rather than the US or UK?
Yes. We're part of the Great West Life family, which includes Canada Life, London Life and Putnam Investments. Canadians tend to have a perception of being good people to do business with - they are not tarred with the same brush as Americans. Certainly when we were last reviewed by AKG, they saw our Canadian parentage as an advantage - the financial strength of Great West Life is one of the reasons we consistently receive a five-star rating from AKG.
- What has been the single greatest innovation during your time in the industry?
I'd say it's got to be the BlackBerry. It's got its advantages - you're in contact with everything 24/7, so for people who travel a lot it means you can keep in touch - but it's also the scourge of family life in that it never switches off.
- Are there any other innovations you would like to see?
From a regulatory perspective, I'd like to see the FSA getting a lot more focused on the banks. A lot of what has gone on in the markets in the last 12 months is a direct result of a lack of regulation over the banking sector. The credit crunch could have been forecast a number of years ago: when bank executives are paying themselves bonuses in the hundreds of millions, it's got to come from somewhere. I'd like to see the regulators act on these obvious areas and stabilise the industry. It's affecting everything - employment, people's pensions - and had global regulators been more focused on the banking sector, some of these issues could have been averted.
- How do you see the offshore market developing in the next couple of years?
I'd say there are a lot of markets where offshore life investments are very effective, whether as a method of paying less tax or just as a packaged product to get into the investment markets. Regulation is changing in Europe to make insurance products more attractive; the key is that regulators have a consistent approach in the way they deal with insurance companies. At the moment, there are a lot of inconsistencies, and it is up to the EU to tackle those and ensure a level playing field for every life company.
- What has been the biggest learning point of your career?
You can't run a company on your own. I learned many years ago that you can only be successful if the people who work for you are strong and experienced, and at Canada Life International I have a very strong team. You need a figurehead to pull everyone in the same direction, but you can't do it all yourself.
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