Five Important Questions To Ask Your Aggregator

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So youve joined an aggregator or are thinking about selling your business to one. You understand the need for scale, for efficiency in operations, for a referral network, for an exit strategy and for professional help to take yourself to the next level. But how that translates into everyday business reality still remains to be seen. That is, what do you do on Monday morning?

Having helped aggregators design their business plans, Im convinced they are on the right track. Their idea is valid and the initial business model can adapt to todays and tomorrows realities. But, to many, they have over-promised and under-delivered. Wheres the problem?

The problem, to date, has been differing and unmanaged expectations, great variations in timing and pacing of changes, and sometimes contrasting personal definitions of what “success” means.

Aggregators, and life insurer home offices for that matter, have a different sense of urgency than entrepreneurs working to create business each and every day. They often cannot understand what its like “out in the weeds.” Most aggregator executives have never worked in the industry before and most of them have never made a life insurance sale. They have a lot to learn about the business.

But that doesnt mean they cant add tremendous value. Distribution aggregator organizations, like the home office and field reps at life insurers, are working hard, mostly behind the scenes, doing the “dirty” work of accounting, cash management, payroll, commission payments, budgeting, income tax filing, human resource rationalization, back-bone technology, compliance, licensing, carrier contracting, base-line planning tools, and production reporting

This necessary spade work is tedious, painful and definitely not glamorous. Last I heard there was no Nobel Prize for financial reporting. But without it, there could be no next phase of growth and increased profitability.

As to what this next phase will look like, the jury is still out. But, I hope the following questions will help life insurance entrepreneurs deal with their new life and will assist those “on the fence” to ask the right questions to help them make the correct decision for themselves.

The distribution aggregator often has become a “home office surrogate, and that is a huge mistake. It must advance to play the role of “corporate center” to emphasize and facilitate growth, expense saving, brand and operational excellence, especially in technological platforms.

Aggregators have the opportunity to “start from scratch” and re-design the business system from top to bottom. To my knowledge, none have to date.

Here are a few questions you should be asking your aggregator today. When you ask them, be specific, get numbers, get firm deadlines, get commitments as to how much capital they will invest in your business this coming year.

1) What specifically are they doing today to pursue growth initiatives beyond the scope of your individual firm?

–Do they have a system for warm leads and referrals?

–Do they have an effective and fair cross-selling system?

–Do they have the ability to serve national banks and wirehouses in a way that is beyond your capabilities?

2) What specifically do they do to improve your relations with your customers?

–How are they helping your staff serve customers better?

–Do they help you deliver and create more value to your brokers and clients?

–Do they make it any easier to sell and serve your clients?

3) What performance measurement and compensation systems do they have in place to reward growth?

–Would your income be greater on your own?

4) Do they have a clear branding program that will help you now and five years from now?

–How much are they investing in their national brand?

–Are they helping you financially with the transition from your strong regional brand to a national brand?

5) Do they have access to capital to help take your business to the next level?

–What is the systems/technology budget and plan?

–Do they have a systems solution for today and three years from now?

–How much, specifically, will they invest in your business and under what terms?

The capabilities for next-generation aggregators

I recently took a very informal telephone survey of 20 firms that have joined aggregator organizations. In general, these firms were moderately positive about their choice; most were optimistic about the future and were taking a “wait and see” stance. About a third of the firms were unhappy and were questioning if they made the right decision.

In these informal conversations, a few themes emerged that merit more in-depth probing. I mention them here to “push the envelope” of excellence and to spur the industry to investigate further what the “premier national distribution company of the future” will look like.

Here are a few themes that came out of my conversations:

–A national brand or a very strong niche brand.

–A system for generating warm leads, referrals, shared work and easy sales without prospecting.

–One simple, yet comprehensive operating, agency management and client management system.

–Strong business consulting, coaching, sales stimulation and motivation programs that increase meaningful activity and grow sales.

–Trust, integrity, empathy and a “roll up your sleeves” can-do attitude by the aggregator.

Time will tell if the aggregator organizations have the management skills, the leadership abilities and the integrity to become successful and sustainable.

Those firms that can answer these five questions with specific programs, dollar amounts, performance metrics and completion dates will go a long way to being the next winners.

Mike McKenna, Birmingham, Ala., helps firms build salesforce and channel management skills to create a sustainable advantage. He is a former McKinsey consultant and executive for a national holding company that purchased financial services distribution companies. He can be reached via e-mail at mjmckenna@earthlink.net


Reproduced from National Underwriter Life & Health/Financial Services Edition, April 15, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.