Some Basics For Creating Successful Strategic Alliances With CPA Practices

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Second of Two Parts: The Solution

Part 1 of this article (in last weeks issue) explored the reasons life agency strategic alliances–especially with CPAs–could be in jeopardy of failing. In summary, strategic alliances, if not initiated properly, can result in giving your partner the necessary product education, market experience and confidence to compete against you.

This part discusses some of the main aspects of a real solution process that has produced over 20 successful alliances between life agencies and CPA practices. These alliances have been in place producing real results, some for over two years.

The entire solution to establishing and maintaining successful strategic alliances is described in a 48-step process and is too detailed to discuss here. However, we can present the basics of how to implement the solution to the concern presented in Part 1.

Step 1: Successful alliance partners start by forgetting about the contract!

Research shows that the number one characteristic for successful strategic alliances is building and sustaining a common business culture by the partners and not the quality, quantity or the length of the contract. In the specific case of life agencies and CPA practices, the best common culture must be one that is client-centered if the partners relationship is to be a lasting one.

Describing that common culture is a top down approach focusing the partners on “whats in it for our clients?” This top down approach is far different from the typical method weve seen partners start with to describe their relationship. Usually, partners initiate their relationship from the bottom up by negotiating their contract with each other.

This “whats in it for me?” approach has produced some of the best contract terms and conditions, commission split formulas and limits on each partners liabilities and damages should the relationship fail. And, thats good because this approach almost guarantees failure.

Whats more, its very easy to get trapped by a prospective partner into discussing and defining contract terms and conditions as early as the initial meeting. Heres a way to avoid that and start the relationship development process correctly.

This is the way to implement the top down approach. First, before you ever meet with a potential partner, describe your agencys client-centered business culture. And, express it in the context of what we call the “broadest possible view” of your culture.

Describing the broadest possible view of your agencys client focus is not a trivial task, but here are some guidelines. The broadest possible view considers the type of clients you target and serve, the range of your clients needs you fulfill, directly or indirectly, and your agencys ultimate commitment to fulfilling those clients needs.

Step 2: What is your agencys broadest possible view?

For example, if you describe the broadest possible view of your culture as “Providing our clients with access to the best selection of insurance products,” how do you think youll be viewed by a CPA practice? Probably as a sales organization the same as every other life agency that wants to partner with them.

But, one life agency we work with describes its culture as “Advocates for our clients financial security.” Another agency views itself as “Focused on achieving our clients lifetime and legacy goals.”

By the way, these two agencies didnt pick these descriptions out of thin air. It required a long, introspective look at what they provide and, more importantly, how much they are willing to commit to provide to their clients. Descriptions like these actually demand that the agencies have strategic alliances with CPAs and others to implement the broadest possible view of their mission. And, potential partner CPA practices will begin to see the role you perform in the relationship to achieve benefits for their clients.

By now youve probably noticed the repetitious use of the word “describe” when it comes to your agencys culture. The reason for this is you just cant say what your culture is; youve got to be able to prove it. And, prove it in the following important and different way to your potential alliance partner.

Step 3: Its not who you say you are, its who I want you to be thats important to me!

Use the opportunity to position who you are in terms of whats important to the prospective partner. This establishes what the potential partner gains by partnering with you and is not likely to gain by partnering with others or, just as importantly, by doing it on their own. For example, put yourself in the shoes (or eyeshades) of the CPA practice with whom you want to be a partner. If you were a CPA practice wouldnt you want to know some of all of the following about a potential financial services partner?

1. How does my potential partner exhibit financial strength and soundness?

2. Does my potential partner possess a comprehensive financial planning process or just product sales kits?

3. What capability does my potential partner have to address the full range and complexity of my clients needs?

4. Does my potential partner possess a full range of products (i.e., one-stop shopping) so I dont have to form multiple and complicated alliances with other financial service providers?

5. What knowledge and expertise does my potential partner have in developing and maintaining strategic alliances?

This list is just an example and, in meetings with CPAs and agencies, has always been incomplete when discussed. The good news is that the list, by itself, has generated conversation and convergence on what is important to the individual CPA practice. And, thats reason alone to do this.

The other significant reason to do this is to provide you with a forum to address how your agency fulfills each of these “important to the prospective partner” needs.

In this article, we cant provide the answers to these questions. But you must provide answers to these questions (or, the questions you develop) to establish your credibility. The strength of your response in these key areas positions you as the partner of choice among your competitors. And, youve also identified the critical reasons why a CPA practice would not want to “go it alone.”

Step 4: Oh, yes. The contract!

The final step in initiating a successful alliance that will keep the partners united is not the contract. Its a plan! Before you and your partner develop the contract or letter of agreement, develop an action plan that includes, among other items, the development of a letter of agreement or contract. The idea is to focus the participants, and soon-to-be partners, on the joint productive activity where generation of initial business and contract development have equal weight.

We use a specific planning methodology with an important difference. It concentrates less on forecasts and estimates of business ratios and more on discovering and overcoming the real obstacles to successful implementation. After all, theres no use wasting several months on negotiating an ironclad contract if no ones going to do anything afterwards anyway.

Establishing and maintaining successful strategic alliances is not for the faint of heart or the unprepared. Agency managers are accustomed to regularly investing in product training and sales education to develop expertise and increase their opportunity for success. They may want to consider doing the same before establishing strategic alliances, especially with CPAs, or face the likelihood of undesirable consequences from their new competitor.

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 14, 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.