As tens of thousands of life insurance and financial planning professionals can attest, launching an independent practice has many attractions, not least of which are the ability to source product from any number of carriers and to run the business as one sees fit. But with that freedom come responsibilities–procuring and managing sales, marketing, administrative, and information technology platforms and staff to support the practice–that to many advisors may be too great a burden.
Hence the appeal of firms that offer something in between: benefits that combine the advantages of a traditional career agency with those of an independent practice.
“Many advisors don’t want 100% autonomy,” says Peter Gordon, president of John Hancock Financial Network, Boston, Mass. “They want the freedom to run their own business while retaining many of the benefits of the traditional career agency system. We’re providing a platform that allows them to secure a level of independence without having to leave.”
What the stats say
That desire for semi-independence is mirrored in a survey that John Hancock conducted in December with Mathew Greenwald & Associates, a Washington, D.C.-based market research firm. The survey examined financial professionals’ attitudes about resources offered through affiliations with business partners such as insurance companies, wirehouses, banks and independent broker-dealers.
Top financial representatives showed a strong preference for certain offerings of a traditional career system, with 7 in 10 reps preferring to work for a nationally recognized company over an independent firm (71% vs. 29%). A majority also preferred the health and retirement benefits usually associated with a career system. Nearly 70% of respondents (69%) expressed a preference for access to a subsidized health care platform compared to increased incentives (30%).
However, experienced financial representatives also showed a strong preference for certain offerings usually associated with an independent broker/dealer. Nearly 9 out of 10 respondents prefer to sell from an open product platform than a proprietary platform, 88% vs. 12%, respectively. They also overwhelmingly prefer to be recognized for their total sales regardless of product mix (80% vs. 19% for product-line sales). In terms of training support, two-thirds prefer to receive their training locally from experts in the field rather than from a home office (68% vs. 31%).
John Hancock Financial Network’s new model, says Gordon, allows advisors to affiliate with JHFN in one of three ways. A “traditional financial representative” option offers a high level of support in terms of infrastructure, supervision, training, and marketing from the local JFHN firm. It also offers both traditional retirement and health plans.
A second option, “independent financial representative” is expected to appeal to entrepreneurial advisors interested in greater independence, control and flexibility over how they build, brand and market their business and the products they offer. A third choice, “producer group,” caters to advisors who have formed alliances to share a common business vision and brand identity and who seek to benefit from the economies of scale, expertise and the local and national resources of a major carrier.
Under the JHFN initiative, advisors can move from one type of affiliation to another as their business evolves. Gordon says he expects the shifts to go in both directions.
“Some advisors will gradually navigate to an independent model; others will want to stay traditional. And many advisors will also revert to the traditional model after going independent. I can’t stress that enough: One model is not intrinsically better than other. All of the affiliations are truly viable.”
A hybrid approach
So, too, perhaps, is an unusual business model offered through Futurity First. Launched in January 2008 with $100 million in venture capital funding from private equity firm Aquiline Capital Partners, the Rocky Hill, Conn.-based company describes itself as an independent career agency that serves the needs of middle-income families and small business owners.
Where’s the novelty? As do career agencies at national carriers, Futurity First employs its own field force of life agents, offering them compensation, retirement and health benefits, plus training and support services, comparable to those provided by traditional career agencies. But the Futurity First doesn’t manufacture its own products. Like an independent life brokerage agency, the company avails of its producers of products from a wide range of carriers.
“We’ve developed a value proposition that we think is very attractive to agents who would prefer not to be totally independent,” says Edward Berube, Futurity First’s co-founder, president and CEO. “These agents like being part of a career agency system and the branding and support that goes with being part of a bigger organization. But they also want independent access to product.”
The company, he adds, is now allocating the Aquiline venture capital to ramp up a national network of offices. Having closed 2008 with some 30 branches, Futurity First’s plan is to bring online another 30 to 40 each year for the next 4 to 5 years. Employing some 300 agents, the combined field force of these offices is projected to grow to 3,000-plus by end of 2013.
The ideal recruit, says Berube, is the “seasoned” agent who has been in the business from 1 to 5 years. The company is also eyeing career-changers who have successfully built careers in other fields and can hit the ground running with an established network of client prospects.
Those who get hired should not expect to be doing advanced sales or marketing variable life products. The company is focused on the middle market (families with household incomes ranging from $30,000 to $200,000), which Berube says remains largely underserved.
“Yes, we have a very contrarian strategy,” he says. “But we think there is a huge opportunity in the broad middle market to sell traditional insurance products through career agents. And the best way to position ourselves in this market is to offer a best in class portfolio with a one-need, one product-at-a-time sales process.”