Little has been said about the retirement issues financial services companies are facing as many of their own producers, many with years of business experience and countless relationships, consider retiring. The potential loss of client relationships and generational learning opportunities might be the greatest risk facing the industry as a whole today. Consider the following:
? There are approximately 78 million baby boomers, and by 2010, 64 million workers will be eligible for retirement.
? The median age for agents in the direct sales force is 48, and 55 years for those in the independent channel.
? Approximately one in four producers plans to retire or sell his or her practice in the next 5 years.
? About 50% of all producers surveyed do not have a successor named.
? Approximately 60% of all producers indicate that succession planning support is not provided or is worse than any other support service they receive.
Identifying the issues
According to a LIMRA study, a large percentage of producers are within 10 years of retirement eligibility, and they also carry with them at least 10 years of industry experience. Additionally, there are nearly 100,000 fewer reps today than there were 30 years ago.
Therefore, there is a huge opportunity for companies that can identify and formulate a successful producer succession planning module. The end result, as we all hope, is a smooth transition of the business that satisfies all parties involved, producers and clients alike.
Most producer succession planning models are reactive rather than proactive; that is, they are “event-driven.” For the most part, building a viable producer succession plan must include long-term support and commitment from the producer, his/her successor and firm management, and target three areas:
(1) Recruiting and retention for appropriate successors.
(2) Development and growth of successors and their businesses.
(3) Effective transition techniques, tools and processes for both the retiring producer and his/her successor.
Recruiting a successor
As I speak to producers, the role of a junior associate has become more critical in producer succession planning conversations. How does one go about recruiting a successor?
The process behind proper producer succession planning involves years of research, development/mentorship and eventual transition. Hence, the question shouldn’t be “how” but “where” to begin to recruit your successor. Perhaps answering that question may lead you to answering the “how.”
Successors may come from various sources: family, friends, clients, etc. And though leaving a business to, say, a child or family member might be the most likely option, it should not be the only one. Some companies have turned to internship programs to recruit talent for producers who may be ten or more years away from retirement.
There is a deep well of talent and long-term professional development among the generation known as “echo boomers.” Though much has been said both positively and negatively about this generation, they provide one of the more interesting and abundant recruiting opportunities, as their numbers top 80 million.
Not to be discounted are recruiting opportunities from within: Through your firm or organization, through the strategic partnership that you’ve spent years building, and through affiliations and associations.
Development involves mentorship… and patience
It is imperative that a potential successor, once brought on board, receive the support, supervision and training to acclimate him/her to the business and the producer’s relationships. Often times, the lack of clear communication about goals and expectations between the two parties involved, and a lack of training, mentorship and support for the more junior associate, lead to an unsuccessful successor pairing. Companies that can provide a solution system to the latter problem will differentiate themselves in the marketplace.
Many companies already have established systems of training and professional development for inexperienced and experienced producers. Therefore, the retiring producer should not be entirely responsible for developing and mentoring his/her successor. Establishing business acumen lies not only with commitment from the junior professional but from the dedication of and support from other members and partners within the firm itself.
Transitioning for growth–where the industry needs to go
Arriving at this juncture involves weathering a long and arduous process. Ultimately, one hopes the transition is as seamless as possible with minimal disruptions to the business and its structure, and most importantly to clients.
We can get lost in the details behind financial incentives for more senior producers to transition their businesses to a junior partner, but the complexities behind this are far more customized than finding a potential successor. Each financial services institution has its own way of dealing with financial and business arrangements; that’s the easier part of the transition should it come to this stage.
This issue is not about what to do at this juncture but what needs to be done to get seniors producers more smoothly to this point. Companies that can offer a centralized system of support for producer succession planning will find themselves at a great recruiting and retention advantage. A smooth transition will also relieve its clients who, despite popular opinion, still strongly prefer and respond to the face-to-face sale. Therefore, we do have much to do to continue to benefit from those loyal relationships.
Michael J. Vietri, CLU, is executive vice president, agency distribution, at MetLife, New York, N.Y. You may e-mail him at .