As my feature article beginning on p. 24 reveals, a number of life insurers with career agent workforces offer new recruits the opportunity to start out working part-time before making a full-time commitment to the profession. But none of the insurers has depended primarily on part-time new hires.
That’s about to change. With the start of the new year, Newark, N.J.-based Prudential Financial will be transitioning recruiting efforts for its domestic career agency system (agency distribution) entirely to a part-time initiative launched in January 2012 and that is yielding unexpectedly positive results for the Newark, N.J.-based company.
Dubbed the Career Development Program, the project offers participants the chance to “sample” the myriad aspects of an agent’s practice—from creating a marketing plan and prospecting, to learning products, fact-finding, presenting a solution, closing the sale and servicing new clients—all while remaining fully employed elsewhere.
John Greene, president of agency distribution at Prudential, says that CDP has “exceeded” the company’s expectations, both in terms of the number of agents recruited through the program and, though the initiative is still less than two years old, a higher than forecasted agent retention rate.
Greene acknowledges the program has had its challenges. Among them: deploying sufficient manpower and training resources to manage the program effectively while also dealing with reduced expectations as to recruits who may not pan out. Green says Prudential has had to recruit “far more people” than under its traditional full-time program to meet headcount goals.
That shouldn’t come as a surprise. CDP enrollees, are, after all, just “kicking the tires,” not knowing whether a career in financial services is right for them. The result: Many of the candidates bail out of the program within the allotted 26 weeks.
But though Prudential might retain a lower percentage of the initial candidates that it would under its traditional program, the company anticipates enjoying a higher retention among those candidates who do become full-time agents—more than offsetting the initial hemorrhaging—because the CDP graduates have had the opportunity to test their suitability for a career in the profession.
What are the program’s costs? Prudential budgets funds for training and managerial support of the recruits. But agents receive no salary or performance-based compensation while they’re actually in their program.
Yes, CDP participants earn commissions on sales, but payouts are withheld until such time as they either leave the program and terminate their affiliation with Prudential or contract with the insurer to work full-time.
Those candidates who opt for the latter thus get a financial cushion to help sustain them during the initial, uncertain, months as full-timers. (They also receive a base-salary on top of commissions that eventually is phased out.)
Since CDP’s launch, says Greene, 75% of all new agent hires have come through the part-time program. Of these, the company is projecting a four-year retention rate—the industry standard for measuring agent longevity—in “the mid-twenties,” well above the industry average, which in recent years has hovered in the low to mid-teens. Beyond four years, agent losses decline substantially.
Given these facts, it’s not hard to see why Prudential is jettisoning its traditional recruitment program in favor of the CDP initiative. True, the change has entailed adjustments on the part of the insurer, both in terms of operational management and adapting to a large, part-time, agent pool.
But as Greene points out, the cost reductions are potentially significant because of the insurer’s lower-up-front investment in the agents: Compensation aside, the company doesn’t cover health, pension or other employee benefits unless and until the recruits sign onto a full-time contract.
Conversely, reduced costs and CDP’s higher than historical retention rate translates to a gain in the return on investment for the company. These gains will only compound as agents who contract to work full-time further their professional development, extend their practices into new markets and, rather than go independent, stay with Prudential as their practices mature.
In sum, the CDP program sounds like a smart move, though perhaps also one that carries risks, given that the carrier is entering—to the extent of its total reliance on part-time recruits—unchartered territory.
But if the program proves to be as successful for Prudential as Greene is predicting, then other insurers with career agencies will likely follow suit. And CDP will become something like an industry standard. In the interim, market-watchers would do well to keep a close watch on the initiative.