Turn Banks Into Allies To Pursue The Ultra-Affluent

In the past, to successfully work with ultra-affluent clientele, a top insurance producer only had to distinguish himself from traditional insurance producers–not always a difficult task. Many traditional producers lacked the special expertise, staffing and access necessary to be successful in the ultra-affluent market.

Times have changed. Being the best insurance firm is no longer enough. Todays competition increasingly is coming from new sources, with better access to clients with a high net worth.

In many cases, the competitor might be a private banker. Banks, with their wide range of financial services, can often position themselves as advisors to the ultra-affluent on a range of tax and financial planning issues, not just insurance.

Rather than trying to compete with a bank, it can be far more profitable to find ways to partner with one in selling to high-end individuals. In fact, it may be critical to remain competitive in the emerging environment.

It is important to recognize that all areas of financial services–banking, investments and insurance–are well segmented according to their target market. For that reason, banks may be looking for multiple partners, because one size does not fit all. The agency seeking a bank alliance may also team with a brokerage firm, certified public accountant or other professional firm that can help the bank reach its targeted markets.

Take the time and effort to look beyond the immediate allure of such an alliance. While it might seem to make sense to engage in a joint venture to sell insurance to a banks wealthy clients, the vast majority of such arrangements fail.

It may be easy to get an agreement with a bank to refer their affluent clients to you for their insurance. But capitalizing on it, truly satisfying the need of everyone involved, is much tougher. Selecting the bank partner, structuring the arrangement and cultivating the strong relationships needed between the agency and bank organizations are all critical components of a successful venture.

Selecting a partner. Whatever route you take to a bank alliance, choose a bank with which you share similar clientele, culture, business philosophies, personalities and commitment to the success of the venture.

The chances of success are further enhanced if bankers are trusted financial advisors or at the very least have a strong and influential relationship with their affluent clients.

If the bank is primarily transaction-oriented, its people may not have sufficient depth in their relationship with clients to help you plan a significant insurance placement.

To be successful, you will need buy-in and active support from the banks top management and a system to communicate continuously with those responsible for introducing you to the banks clients.

It is also important to know the banks motivation and expectations for entering into the arrangement. If it is revenue sharing, how much income would be meaningful?

Though revenue may be the primary motivator, understand they also may be looking for other ways to do one or more of the following:

–Add additional value to their client relationships;

–Better position themselves within a specific target market;

–Block other competitors from encroaching on their book of business;

–Become better educated financial advisors overall; and

–Be introduced to your own clients or to other advisors who could help them develop additional business.

Be honest: Are you in a position to help them achieve these goals?

Other questions to ask:

–What is the banks commitment of time and other resources?

–What could go wrong?

Try to foresee potential pitfalls that could keep your partnership from working. Recognizing and addressing these issues on the front end will help avoid some obstacles and position you to better deal with the unforeseen as it arises. Approach the partnership with open eyes.

Developing An Alliance. Recognize the difference between a signed agreement and a workable relationship. Much time has been spent negotiating contracts that never resulted in any business. Avoid the temptation to limit the scope of the agreement to revenue sharing.

Use the agreement and its discussion process to define roles and expectations clearly, and to develop business strategies and processes for tracking results and for communicating between your agency and the bank. Set dates after the agreement takes effect to review and evaluate activities, results and effectiveness.

When determining revenue sharing between your organizations, consider how it would affect the referral sources on the front line. Are there enough incentives truly to motivate bankers to send business your way?

Also, determine the commitment of time and other resources youll need from the banks people and they from you. Its better to uncover unreasonable expectations on both sides and differences of opinions, strategies and other issues at this early point than after investing a year of your time. Use the agreement process to build a bridge.

The important point to remember is that you must think like a business person for a bank alliance to succeed. Think profits rather than revenues, and measure long-term service commitments.

What percent of commissions does it take to acquire and service a piece of business? Is it a good business decision to give away 50% of the revenue but keep all the service responsibility? Perhaps this would not have been such an important issue in days gone by, but with todays insurance products lack of guarantees, sensitivity to interest rates and greater investment orientation than ever before, active insurance portfolio management is critical.

Determine your costs, first year and continuing, then negotiate a sharing of the profits based on those figures.

Forming a successful alliance is a process rather than an event. Each organization involved should designate a point person responsible for driving the relationships strategies and activities and accepting responsibility for its ultimate success or failure. These point persons constantly must communicate, encourage and create activities that help to introduce clients to the producer.

But introductions themselves are not enough. If the source of an introduction is not respected by the client as a true financial advisor or does not have strong and influential relationships with them, the chances of success are diminished greatly. Bankers must be comfortable enough with the insurance advisors professionalism, approach, product and service to be willing to use their influence to introduce their best, most valuable relationships.

In approaching the banks clients, you must stress the needs of the client (which the client may not always know) and position yourself as the most qualified professional to provide a solution. You, in turn, must understand and appreciate that the advisor on the bank side has put his relationship and credibility on the line and that he expects to be kept fully informed every step of the way. Leave him out of the loop or treat his client with anything less than the utmost in professionalism, and you will not get another introduction.

You must also be positioned to be more than an afterthought to your bank partners. You must become an integral part of their normal thought process. This requires your regular personal involvement, providing training to help partners on the bank side to identify the prospect, cultivate a need and position you as part of the solution.

Bankers dont need to become experts in insurance but do need to be comfortable enough with their knowledge to raise the topic confidently in conversation with clients.

You can further reinforce this training by regular communications re-emphasizing your key points, sharing success stories and generally moving your name and message to top-of-mind awareness with the bankers.

Putting together a successful bank-agency alliance is not easy. You cannot simply sign an agreement and expect it to happen. It requires the same level of time, effort and commitment as prospecting directly. However, properly selected, positioned and developed, it should open more doors within your target market and enable you to improve your closing ratio, thus making your time more productive.

Even the best intentioned referral sources typically produce somewhat sporadic results, but an alliance that compensates the bank for results gives you the right to expect productive referrals. After all, you both benefit from the fruits of your joint efforts.

To be successful in the ultra-affluent market, you only have to get in front of the right people and have something meaningful and compelling to say when you get there. A joint venture or alliance can help solve the first part of that equation. The rest is up to you.

Michael J. Brink, CLU, is director of the insurance advisory firm of Nease, Lagana, Eden & Culley Inc., Atlanta, Ga., a member of the M Financial Group. He can be contacted at mbrink@nlec.com.

The author would like to acknowledge contributions to this article by Brian Ellerman of Mullin Consulting, Chicago, and Don Morris of Sitzmann, Morris & Lavis, Inc., Oakland, Calif.


Reproduced from National Underwriter Life & Health/Financial Services Edition, October 17, 2003. Copyright 2003 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.