Regulations and rewards in the financial and insurance industries
Imagine planning a meeting with one hand tied behind your back. Oh, and the other hand tied, but (maybe) slipping free.
That’s the challenge if you’re a planner in the financial and insurance worlds, two of the most highly regulated market segments in the U.S. On one hand is government rules and regulations—some of which are new, some revised and some unclear. On the other is negative perception— opinions based on abuses of travel and entertainment in the past.
And that’s before meeting design and logistics even come into play.
Whew! But along with these inherent challenges in the industry, there is good news to report. According to the 2012 American Express Meetings and Events Forecast study, 60% of meetings suppliers say the meetings and hospitality industry is on an uptick. After several years of struggle, and being on the front line of scrutiny, financial services meetings also are on the road to recovery, with a forecasted 36% increase in global meeting activities. Drilling down to the trenches, meeting demand from this segment, which represents three out of five of Omni Hotels and Resorts’ top customers, “is very significant and very solid,” says Tom Faust, vice president of sales and distribution for the brand.
Further good news: In the spring 2012 Pulse Survey conducted by the Incentive Research Foundation (IRF), respondents indicated they are “more optimistic and consider the economy as having a more positive impact on their ability to plan and implement incentive travel programs when compared with the previous results [reported in November 2011].”
And while we’re on a roll, the job outlook for planners is also strong, according to MPI’s February 2012 Business Barometer, which reported growth in business and employment. Membership in the Financial and Insurance Conference Planners Association grew 15% in 2011, to nearly 600 planner members—the organization’s highest growth rate since 2005. Interestingly, the number of planners who identify themselves as strictly financial (as opposed to financial/insurance or insurance only) grew 30% last year.
Planners’ hands are likely to remain tethered; it’s the nature of their business in a tough regulatory environment. Following is a snapshot of this highly specialized segment of the meetings industry and where it stands today.
Rules & Regulations
Whether they work for public or private enterprises, planners are acquainted with a variety of rules and regulations that go beyond their own organization’s guidelines for meetings and events. Publicly owned companies have been working under the Sarbanes-Oxley Act since 2002 (thanks to Enron, Tyco International, etc.), with record keeping and reporting requirements designed to increase transparency for the public’s benefit. There are federal and state income tax codes to keep in mind as well.
The newest kid on the block is the Dodd-Frank Wall Street Reform and Consumer Protection Act, now nearing the end of its second year in effect. Among its many provisions, this act provides brand-new federal oversight of the insurance industry, whereas previously state insurance commissions took the lead regulatory role. Companies— and planners—are staying tuned for updates and clarification, especially regarding informationgathering requirements and sales contests (see pwcregulatory.com for periodic updates), but it’s agreed that Dodd-Frank will have a major impact on this sector.
Keeping up with the laws and regs is a challenge, as these change with new interpretations and fleshed-out details on a regular basis. Planners rely on their company’s legal adviser or compliance officer for the latest information. Financial & Insurance Conference Planners (FICP), the planners’ industry association, addresses compliance issues at its meetings.
Then there’s FINRA, the Financial Industry Regulatory Authority, the largest nongovernmental regulator for securities firms doing business in the U. S. It falls under the jurisdiction of the Securities and Exchange Commission (which is a government body), and is, in effect, Wall Street’s self-governing organization.
According to Maribel Gerstner, president and COO at Allstate Financial Services (quoted on specialevents.Com), FINRA rules apply to “banks and broker/dealers that sell securities products and are registered with FINRA. The rules typically come into play when your company is a product provider and you want to get registered reps who work for other companies to sell your products.” This oversight also extends to firms that offer professional training, testing and licensing of registered persons, among others. (To give you an example of its purview, FINRA oversees nearly 4,420 brokerage firms, 162,575 branch offices and 629,280 registered securities representatives.)
FINRA may not be an acronym that’s on the tip of your tongue if you work, say, in manufacturing or retail. But to those planners in the financial services industry, it’s a living, breathing presence, covering the range of meeting planning elements: sales meetings, sales contests, incentives, training and education, gifts, entertainment—and more recently, social media.
CORPORATE AMERICA is walking on eggshells trying to stay out of the media.
–Participant in the Lynette Owens & Associates “ Life Insurance Advisory Council
Sales Meetings & Contests
Sales meetings and contests come under special scrutiny. For example, a company can invite all of its own sales reps to a meeting, but can’t limit attendance to only those who achieve certain sales goals. A sales contest—with an incentive reward trip, for instance—can’t be based on the sale of one proprietary product; it must encompass the “entire universe” of the company’s products. (Otherwise, a rep may be tempted to sell that particular product whether or not it’s appropriate for a client.) Trespass on this compliance issue, and the firm gets hit with both sanctions and demands for restitution.
Speaking of pure incentive trips, they can be offered only to registered representatives of the hosting company—not registered reps of other organizations who could potentially sell the company’s products. And, once again, the “winners” must qualify based on the company’s broad range of products, not just one.
Employee recognition travel programs, where employees are nominated by their peers and management, don’t fall under these regulations as long as—you guessed it—no sales criteria are involved.
Training & Education
One area that’s tightly regulated is training and education meetings. These are required to occupy “substantially all the workday.” That boils down to three hours of education for half-days and six hours for whole day or overnight meetings. Overnight comes into play when there is a chunk of travel time involved in getting there and returning home after a full day’s work. Travel costs—from air to hotel—are paid and reported. There are no off -site meals or excursions and no entertainment off erings.
Choosing a location for T&E meetings entails a bigger challenge than the planner’s usual research and due diligence. The rules say “reasonable” or “appropriate”—but the interpretation is up to the planner, unless (or until) proven wrong. Where does the “R” word (resort) fit in? It depends where your attendees are based, the goal of the meeting and the content of the meeting, among other criteria— plus a strong business case to back up the decision. Practical destinations in regions such as Florida or Southern California are chock full of reasonable hotel choices that may also be considered resort properties.
Gifts & Entertainment
No surprise: Gifts and entertainment for broker/ dealers come under regulation. Gifts (other than to the company’s own employees) are subject to a strict $100 limit per person, per year (some planners have eliminated the nighttime turndown gift to comply). Entertainment, generally, must be considered “reasonable,” and that can vary by city. Rules also apply to sports and theater tickets, golf and so on.
No one argues that the constraints in new and existing legislation are a bad thing: The regulations protect consumers who purchase the products and support the integrity of the entire financial services/ insurance infrastructures. But they do require that planners know how to set up their meetings and communications, what to report, where to report and to whom—for legal as well as ethical reasons.
After the AIG fiasco in 2009, when the company was roundly pilloried for spending $443,334 on an incentive meeting at a luxury resort after accepting an $85 billion bailout in TARP funds, many meetings and incentives were abruptly canceled. Meetings became a scapegoat for the sinking economy.
Rather than pay cancellation fees, some companies went under the radar and were as low-key as possible—even to the extent of using a fictitious name on the hotel’s leaderboards. Planners themselves kept under the radar—and still are for the public and the media. “Corporate America is walking on eggshells trying to stay out of the media,” says one participant in the Lynette Owens & Associates Life Insurance Advisory Council, an annual conference of leaders in the insurance arena.
Fortunately, the frenzied rush to cancel meetings post-AIG is over, says Omni’s Faust. Cancellations are unlikely today, and if one does become necessary, the company’s business model is to allow planners to rebook at any of their properties, he says.
Today, the public’s perception of meetings has gradually changed for the better, due in part to the industry’s recent advocacy campaigns. Internal perceptions—from stakeholders to stockholders— have changed as well. “Meetings are an important business tool. Certain things can be communicated and better shared face to face,” says Caryn Kboudi, vice president of corporate communications for Omni. “Meetings are important to our economic well-being as a country.”
The industry has gotten a lot smarter about counteracting negative views of meetings, she adds. But abuses still continue, impacting perception. Case in point: The current GSA flap in Las Vegas (see more on pg. 38) involved judgment calls that were far from the norm. According to Melissa Van Dyke, president of the IRF, the benchmark for an incentive travel event per person is $2,500, which is mitigated by an increase in sales by that person. GSA’s per-person spend was $2,800 per person— above the norm for incentives and way above the best practices benchmark of $1,000 for an internal meeting of that type, but hardly as outlandish as the media reports made it out to be.
Financial-insurance planners face their own set of challenges beyond rules and regulations, in addition to those that impact planners across the spectrum. Here are a few:
Benchmark Hospitality International’s 2012 trend forecast predicts what everyone’s been privately saying: Luxury is back in the meetings industry. (That’s not to say that there’s a blank check; procurement and compliance departments are still scrutinizing budgets, contracts and the like.) But the perception card has flipped. Kelly Foy, CEO of Elite Meetings, which represents upscale luxury properties, says his company has seen a huge increase in volume: RFPs in the insurance field alone have seen a 164% increase, and the investment sector 866%, year over year.
On another note, because of the compliance guidelines for training and education meetings, there’s also a high demand for hotel space in large metropolitan cities. According to American Express’ forecast, 71% of planners (in all segments) are booking in primary/large cities, compared to 31% in second-tier cities. This bodes well for those properties in large cities, but doesn’t bode quite as well for planners, who may find their preferred dates unavailable or more costly than in the past few years. “Many planners would rather shift dates or cities than pay escalated rates due to compression,” says Vicki Poplin, director of sales and marketing for The James Chicago.
Emerging Sellers Market
This increased demand is causing a shift in the planner/hotelier equation. Elite’s Foy notes that the pendulum seems to be swinging toward a seller’s market, but not quite yet. Hotel rates are rising, as is occupancy. “It’s simply supply and demand,” Faust says. Supply growth is sluggish, with few new hotels being added to current inventory in the U.S. (except for a handful in certain markets. See pg. 67 for more on new and renovated properties). “Rates go up as the demand goes up,” he adds.
While lead times are lengthening for individual travelers, that’s not so for groups. Properties across the spectrum report that many bookings have been made in the short-term over the past few years. Ann Graham, director of sales and marketing at Lake Placid Lodge in upstate New York, agrees: “Most groups are booking no further than two months out.”
That’s a majority position based on the latest study by American Express, in which findings show that 62% of planners surveyed expected decreases in their lead time for planning, with only 7% expecting an increase. This could mean a rude awakening for planners when push comes to shove in the supply/demand arena.
Convergence of Meetings & Incentives
This is where the picture also gets hairy. In a joint survey conducted by the SITE International Foundation and MPI Foundation of in-house corporate planners worldwide, 61% of respondents said that the inclusion of business meetings with incentives was on the rise. Thirty-seven percent also said that their respective roles (meeting planner or incentive program planner) were overlapping, as each was being required to expand responsibilities beyond the primary role. A caution here is the possibility that the business portion could be seen as education, which would then put incentives into the T&E category and subject to FINRA regulations.
As the saying goes, what doesn’t kill you makes you stronger, and the axiom holds true for meeting planners. Over the past few years, planners have struggled with slashed budgets, fewer job opportunities and intense scrutiny and second-guessing by their management and procurement departments.
What happened as a result of these actions? Hotel/planner relationships—long valued—were burned by cancellations and the fierce tug-of-war over rates and concessions. Training programs took a nosedive, went online or became virtual meetings. Planners were forced to do more, much more, with much less. Incentives, even those less ostentatious than in the past, got disincentive-ized. It was the bottom line, baby.
And then—here’s the good news—what happened after that? Planners emerged stronger and wiser than ever. “Never have planners been so dialed into the corporate radar as to their value in their companies,” says Steve Bova, CAE, executive director of FICP. In fact, planners took their seat at the proverbial table. As their jobs were on the line, they took on more responsibility, developing from tactical planning to meeting program design. And with that responsibility came accountability, says Kemp Gallineau, senior vice president and general manager for Gaylord Palms Resort and Convention Center in Kissimmee, Fla. Ever-resilient, planners delivered. They initiated Strategic Meetings Management programs, became involved with ROI measurements and learned to speak the language of business, particularly communicating the value proposition of their meetings. “The meeting planner job has evolved,” Gallineau says. “The meeting planner title is now about resource management and increased business acumen.”
Hotel/planner relationships are being repaired as both sides have settled into a win-win negotiating experience created by the current economic breathing space. Companies have recognized that training is critical in an increasingly competitive world and are upping their training budgets (which climbed 9. 5% in 2011, according to Bersin & Associates).
Doing more with less inspired unprecedented program changes, Bova adds. “If budgets remain flat, the need for creativity increases.” Budget cuts aff ected the number of meetings, the number of attendees per meetings, transportation, accommodations, F&B, decor, entertainment—all the components that make up a meeting, he says.
On the other side of the coin, agendas became more rigid as attendees needed to get more out of meetings to explain to their bosses (and to themselves) why they needed to be there. So planners added better speakers, better training and more meat in their meetings than in the past despite skimpy budgets, Gaylord’s Gallineau says. Still, planners did what they had to do—living up to (or exceeding) last year’s event. (Actually, 80% of planners in IRF’s Spring Pulse Survey said they were pleased with their travel and meeting program experience.)
Incentive travel, which took a major hit, is also on the rebound. The IRF survey reports that while 49% of respondents anticipated budgets for incentive travel programs would remain unchanged this year, 36% indicated that budgets for these programs would increase slightly.
And how is that bottom line? The survey also showed that budget reductions negatively impacted sales results. Moreover, for those companies that did cut their budget, 67–73% indicated that sales results decreased and 60% indicated that profitability results decreased as well.
Planners have had to make a lot of cuts over the past few years, says IRF’s Van Dyke, but they’ve made wise decisions, and made the business case for their events. “It’s the expertise of these core individuals that has made a diff erence in the success of the industry,” she says. “We’re now positioned very strongly to be successful in 2013 and beyond.”
Social Media Compliance
As in every other aspect of our society, social media in the financial services and insurance world has grown exponentially—and the possibilities for noncompliance equally so. In fact, according to a survey by the Securities Technology Monitor, “while the participants’ use of social media is ‘booming’ overall...55% of those surveyed cited compliance as their ‘biggest concern’ in social media.”
Financial services companies were a little late jumping on the social media bandwagon, says Tim Walker, marketing program manager at socialware.com, but they’ve now made the leap big time. Along the way, they’ve also had to establish social media policies for their organizations, which may include such elements as pre- and post-review of social media posts (including blogs), supervision, what content is appropriate, and above all—for all forms of social media and communication devices such as mobile phones, tablets, laptops and desktops—archiving posts and updates (via software, such as Socialware) for tracking and monitoring purposes.
Social media is the technology du jour, and the trick here for firms is not running afoul of regulations governing advertising and marketing (Twitter, for example, can be considered advertising). This can impact personal social media outlets as well as business outlets. For instance, it’s generally agreed that you can interject a little personal info in your business profile, but you can’t include business in your personal pages. In fact, some sales reps may need to get permission from their company to mention their employer on their personal social media site.
The rules are ever-changing, and while some provisions of internal or external social media policies may not apply to planners, it’s wise to be aware of them.
An Insurance Industry Executive’s Take on Incentives
Lynette Owens & Associates is a San Diego-based hotel marketing and event-planning company. One client on the fraternal side of insurance, who wishes to remain anonymous, has offered this overview of incentives and his company’s role in them.
As a whole, the public has no perception of incentive meetings. The only time the issue receives attention is when an industry oversteps the reasonable expectations for such an event.
At our organization, programs are subjected to discussion and final approval at the highest level. We have driven toward a better ROI by raising the productivity level requirements it takes to attend.
One of the things that separates our incentive trips from some other companies is that we never have considered it a nontaxable education event. We set it up to be fun, and we set it up as taxable income. If they earn the trip, they will pay taxes on the value. I believe that insulates us from some of the potential hostility.
The incentive trip is the motivating carrot today and has been for 30 years. If you truly want to be considered part of our top field force, the first and biggest factor is earning the incentive trip.