TORONTO — Life insurance for a baby might sound a little off, but fast-growing Greatway Financial Inc. says it's never too early to sign up.
The Calgary-based company, which sells policies on behalf of insurers across Canada, puts much of its focus on the investment side of life insurance plans, billing them as a tax-sheltered way of boosting returns.
"Babies are the easiest and fastest to qualify because most won't have any health history," the company notes.
Greatway’s approach, and the way it coaches its purely commission-based agents to use its "result-proven system" to sell insurance, has, however, raised serious concerns with regulators — so much so that Ontario's insurance watchdog ordered the company to destroy all teaching materials, and retrain agents by the end of March, because the old instructions could lead to unfair or deceptive practices under the law.
The Financial Services Regulatory Authority of Ontario (FSRA) alleges that Greatway has focused its sales almost entirely on universal life insurance, a complex financial product usually used by the wealthy for estate planning. It also alleges the company's training encourages agents to sell the same product to all consumers regardless of their income or needs.
While Greatway has disputed some of the regulator's findings, it has agreed to comply with the order.
Along with remedial teaching for all its agents, the order requires the company to reach out to all Ontario policy holders to help them assess whether their plans are really suitable and to help address concerns if not.
Growing scrutiny
The enforcement action is part of a wider effort by the FSRA and other regulators looking into the risks created by multi-level marketing companies such as Greatway, whose business models are based on agents who are paid both through commissions on their own sales and a portion of the commission for agents they recruit to the company.
The model, combined with the company's sales strategy, has led to some Greatway agents pulling in more than $1,000,000 in a year, the company says, while its YouTube channel profiles former cab drivers and house cleaners who have made well over $100,000 in their first year at the company.
Meanwhile, a report on the business model by regulators including the FSRA noted that a company matching Greatway's description mostly targeted newcomers to Canada with incomes generally ranging between $40,000 and $50,000.
The report said that the model has seen rapid growth in recent years, with Experior Financial Group Inc., World Financial Group Insurance Agency of Canada Inc., and Greatway together increasing their agent numbers by about 40 per cent from 2020 to 2021. As of 2021, the three companied had about 27,000 total agents, plus about 66,000 recruits.
Greatway itself has gone from 1,400 agents selling about 13,000 policies in 2018 to 4,000 agents selling almost 28,000 policies last year.
That pace of growth has created added risk due to the number of inexperienced agents, said Huston Loke, executive vice-president of Market Conduct at the FSRA.
“You put that situation together with training materials that we believe to be inappropriate, then you have a recipe for customer harm.”
A complex product
There are numerous financial implications to Greatway's sales strategy. The regulator found that the company only requires training on selling 'overfunded' universal life insurance plans, where payments above the insurance premiums accumulate as tax-sheltered savings through a strategy called an insured retirement plan.
The regulator's investigation found that Greatway instructed agents to downplay the insurance side of the product entirely, specifically to "remove the insurance mindset," to "not mention insurance amount," and to focus on the investment returns, while instructing in red letters "DO NOT HIGHLIGHT" on the training material page for critical risks of the product.
A key part of problem with the financial strategy, said Vaneesa Cline, a financial planner in Calgary, is that the cost of the insurance ramps up rapidly with age. That diverts payments away from the investment side and saddles buyers with a lifetime of rising costs for a premium product they may not even need, she said.
Cline said she's helped several former Greatway clients sort out their finances, including one man who was initially paying about $250 per year in premiums, but by the time she met him in his 60s, he was critically ill and his family was struggling to make payments of $600 per month.
“It's potentially devastating,” said Cline. “When (clients) get to retirement and they need the money the most, the cost of the insurance inside these policies is so high that it quickly depletes the cash value that has built in these policies, to where these policies lapse."
Universal life plans can be a great way to create financial security, said Cline, but only to suitable clients who have already maximized payments to more common tax-sheltered options like RRSPs and TFSAs (or in the case of babies, RESPs).
Greatway, which declined an interview request, said in an emailed response to questions that agents are trained to provide clients with the best possible solutions that adhere to suitability, needs, goals and budget, and that all clients go through a financial needs analysis with their agent to find the best option that meets their needs.
'So surreal'
Loke at the FSRA said the regulator will continue to monitor Greatway, and that it is still looking into other companies with similar models, as well as individual agents and the insurance companies whose products they sell.
There are however limits to what the regulator can do, as there aren't laws against either Greatway's corporate structure, nor requirements to disclose commissions.
Those commissions can run up quickly in part because the payouts are front-loaded with such permanent life insurance products, said Jason Pereira, a financial planner based in Toronto. That means that rather than paying a small percentage of managed investments over a lifetime, the agent gets the bulk of it right away.
It helps explain how Greatway says it has well over a hundred agents pulling in more than $100,000 a year, even as most work part time.
One agent, Melanie Uy, said in a LinkedIn post soliciting new recruits that she earned $200,000 in extra income over 12 months while still working her day job with the Alberta government.
"You may find it so surreal, too good to be true," said Uy, talking about two others who made $500,000 in a year after only two or three years in the industry.
"But if you have an open mind, you will uncover, recover and discover this opportunity for sustained, profitable growth.”
If the commission isn't enough to incentivize sales, Greatway also offers prizes such as Mediterranean cruises or Teslas to top sellers.
Pereira said along with Greatway, he's seen a spike on social media of people talking up life insurance as an investment vehicle using "unbelievably faulty logic and terrible math."
The more commonly purchased term life insurance is much cheaper and makes much more sense for most people, as do more conventional investment options, he said.
“This sort of action makes me livid, quite honestly,” said Pereira. “These are monies that were diverted away from retirement savings and education savings that would have been more flexible.”
Greatway says it is doing what's best for its clients, as it has since it was founded on "principles of integrity" by Marlon Antonio in 2010, and that its vision remains to help families "avoid financial ruin."
Regulators and critics remain skeptical, but some agents sound like they're believers.
"Greatway is the way to achieve and fulfil your destiny. Your purpose,” said Carol Villarica, who with her partner Hector became the first seven-figure earner over 12 months at Greatway in 2020, as she spoke at a company convention last year.
“Because when your why is clear, the price is an easy price to pay. All your sacrifices, all our sacrifices, will be worth it.”
This report by The Canadian Press was first published Feb. 12, 2023.
Ian Bickis, The Canadian Press
