Normandin Beaudry's policy pertaining to incentive compensation paid by insurers and investment managersLinkedIn
There, in black and white
NB Vol. 8 N. 1, January 2005
Over the last few months, several actuarial consulting and brokerage firms have been tarnished by an incentive compensation scandal as the result of an investigation by New York Attorney General Eliot Spitzer.
We feel it is important, at this point, to remind everyone of Normandin Beaudry’s policy on incentive compensation.
Methods of Payment
For work performed in the areas of retirement plans, asset management, general insurance and human resources, we are paid exclusively on a fee for service basis. Invoices detailing the work conducted are sent to our clients monthly.
For group insurance work, we are paid on a fee for service or commission basis. As an actuarial consulting firm, we are authorized to receive commissions from insurers for services rendered to our clients. The choice is left to the client regarding the form of payment.
Since our establishment in 1992, we have applied a clear and transparent policy when we have been paid on a commission basis by a client’s insurer. Our clients periodically receive a statement of the fees incurred compared to commissions received from their insurer. In the event of a deficit, the commissions are increased the following year. In the opposite scenario, commissions are reduced or returned to the client in the form of additional services.
What is incentive compensation?
Some insurers pay out commission bonuses (also called incentive compensation or contingent commissions) to intermediaries (brokers or actuaries) whose business volume reaches a certain level. To our knowledge, these bonuses only apply to business for which payment to the intermediary is based on commissions. When we receive such bonuses, they are entirely disclosed and returned to the concerned clients in the form of additional services or a reduction in regular commissions. The objective of this policy is to ensure our total independence and objectivity when recommending an insurer to our clients.
Relative to investment managers, some return client brokerage ("soft dollars") to the client’s advisors. Normandin Beaudry’s policy regarding soft dollars has been clear since 1992. No compensation is accepted through the use of soft dollars. Moreover, Normandin Beaudry receives no compensation in any form from investment managers who participate in our database.
We want to remind everyone that our consultants respect the Rules of Professional Conduct of the Canadian Institute of Actuaries, which include rules on the disclosure of all compensation received.
Please feel free to contact us for additional information.
630, René-Lévesque Blvd. West, 30th floor
Montreal, Quebec, H3B 1S6