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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.

This relieves the CPAs–who are the first to admit they are not sales people and that life insurance is something that is sold not bought–of direct selling effort. Further, many CPAs think that direct product selling diminishes their client-focused objectivity and trusted advisor-client relationship. CPAs seem to prefer, for now, the “arms length” relationship with a life agency afforded by a strategic alliance.

Life agents benefit as well because the CPA practice provides a source of new insurance prospects. Life agents know that if theres one thing harder than selling life insurance its developing a continuous stream of qualified prospects to sell to. On balance, then, the relationship between CPA practices and life agencies seems mutual and balanced, at least for now.

So, wheres the rub?

There is the real potential for this symbiotic relationship to turn into sleeping with the enemy. The best CPA partners can quickly become more and more confident representing wealth management strategies and client benefits embedded in the life insurance products. The best CPA partners will also understand that their trusted advisor-client relationships are just as important as product sales knowledge and expertise. The best CPA partners will realize these conclusions even if the life agents dont.

Ironically, the more aggressive the life agency is in pursuing results from the partnership quickly, the quicker the CPA can become self-sufficient and implement a “go-it-alone” program. The agencys investment of a year or more in time, education, marketing, joint planning, and business plan development can turn into nothing more than an expensive lost revenue opportunity.

Next Week: Whats an agency manager to do?

are consultants with Benchmark Consulting Services, Ltd., which focuses on providing agency managers with practical solutions for growing their businesses. James can be reached via e-mail at jameskerns@comcast.net and Rich at rich_deluca1@email.msn.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, October 7, 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.