First of Two Parts: The Problem
While its probably true that most partners enter strategic alliances cautiously, they probably dont enter them suspiciously. However, managers of life insurance agencies have reasons to be suspicious of alliance partners, especially if those partners are CPA Practices.
Benchmark Consulting Services Ltd., continually surveys the business development strategies of life agencies as part of our advanced marketing firm program. Almost 80% of the 90 life agencies we have worked with over the past four years have tried strategic alliances, mostly with CPA Practices. In addition, two large insurance carriers we work with have implemented corporate-sponsored CPA alliance programs.
From this work, we have observed that strategic alliances between life agencies and CPA practices, if not done properly, can unwittingly provide the partner with the training and confidence needed to become a significant competitor. Agency managers beware!
CPAs are prized for their trusted-advisor client relationships and this makes them the leading target for alliances sought by life agencies. Also, CPAs are now allowed to receive commissions on the sale of insurance. The result is that the best CPA practices are both being sought after and seeking to partner with life agencies. Remember, the best CPAs are good entrepreneurs striving to build their businesses, too!
CPAs must be licensed to qualify for insurance commissions and usually need to establish a separate profit center usually in the form of an LLC to receive actual payment. This is where and why the strategic alliance begins. The CPA practice initially benefits from the valuable knowledge and experience of the life agency and the carrier-provided strategic alliance program. In addition, the agency and carrier program educate the CPA in understanding life insurance product features and client benefit.
Following this “getting up and running” stage, the life agents then begin marketing directly to the CPAs clients and, usually, take responsibility for closing the business. The CPA receives a partial commission on any sales based on the level of involvement.