The new president of the National Association of Insurance and Financial Advisors (NAIFA) outlined how the 122-year-old organization plans to reverse the decline in membership in recent years during a closing National Council session at NAIFA’s Career Conference and Annual Meeting in Las Vegas on Tuesday.
Among other measures, the recruitment drive calls for strengthened partnerships with sister associations and with state associations within the NAIFA federation. The initiatives come at a time when NAIFA is committed to ratcheting up political advocacy efforts to guard against proposed federal and state regulations and legislation that threatens the industry.
“We’re in the midst of a perfect storm, with health care reform, regulatory reform and tax reform,” said Robert Smith, who assumed NAIFA’s presidency at the close of the NAIFA’s National Council Meeting on Tuesday, replacing outgoing president Robert Miller. “We’re currently battling to protect the products we sell and the business models we use.”
Simultaneously, Smith added, NAIFA is fighting an internal battle, as many within NAIFA have questioned the association’s direction, mission and plans to boost its membership.
“Let me assure you: We do have a strategic plan,” said Smith. “NAIFA’s mission statement has never been more relevant. Your board [shares your] concerns–and we’re doing something about them.”
Smith proceeded to outline a laundry list of developments that account for NAIFA’s diminished ranks–dubbed the “elephant in the room”–and that NAIFA is dedicated to surmounting the challenge to expand its footprint nationally and ratchet up its political clout on Capitol Hill and in state capitols.
To illustrate the seriousness of the issue, he noted that NAIFA, one of the largest state associations in the country, has suffered a significant reduction in members over the last 20 years: plummeting from 2,648 in 1993 to 1,244 in 2005 and again to 1,150 this year.
The “massive” membership decline experienced by state and local associations, Smith noted, has happened despite the implementation of 50 “independent test labs” or pilot projects that NAIFA has implemented to explore ways to attract new recruits.
To ascertain the reasons for the dip and ways to reverse the hemorrhaging, Smith said, NAIFA formed during the year past, a blue ribbon task force composed of prominent past and current leaders of the federation, a cross-section of NAIFA members, plus an expert on associations. Outgoing President Robert Miller and NAIFA CEO Susan Waters also assisted in the effort.
The task force concluded that NAIFA 21, a strategic growth plan drafted under former CEO David Woods, remains sound, as does the association’s mission statement. The blue ribbon panel found also that “virtually every well known association” is experiencing comparable levels of membership attrition. And, said Smith, the panel noted that NAIFA’s federation structure–one dating from the early 1900s and encompassing more than 600 legal entities–is “not nimble or efficient.”
Smith said that NAIFA’s membership dues are “reasonable” for a political advocacy organization but noted that member attrition places “greater strain” on the association members to pay more to healthy financial reserves, which have been taxed in recent years.
“The inability of the NAIFA Board to control the amount and the timing of revenue, coupled with a less than adequate reserve, puts this association’s mission at risk,” said Smith. “This lack of control dominates the board’s focus.”
A major factor contributing to the membership shrinkage, said Smith, is the diminished number of life insurers that recruit and train new agents. Industry consolidation since the 1990s has resulted in the loss of once household names, including Mutual Benefit, Connecticut Mutual, Provident, Paul Revere and Jefferson Pilot. Most recently, Hartford Financial exited the life and annuity business in the spring of this year.
Conversely, said Smith, the companies that have prospered are not significantly larger today than they were in the 1990s. He noted that Northwestern Mutual Life, New York Life and State Farm together comprise nearly 40% of NAIFA’s membership; and like other carriers, struggle to fill quotas to for new recruits.
“The financial services industry is 15% underemployed–this at a time when people are seeking jobs,” he said. “More financial advisors are desperately needed. The average age of agents is now in the mid-50s. And the agent field force has shrunk by 2% to 3% every year over the past several years.”
Also factors to consider, said Smith, are the current regulatory environment and weak economy, which have left insurance professionals with less time and resources to devote to association activities and professional development.
“There is more regulatory oversight, company compliance and information overload,” said Smith. “Agents and brokers are less inclined to get involved in activities that dominate their time, especially if the commitment could last for years.”
These negatives aside, Smith observed that the pool of agents unaffiliated with NAIFA leaves plenty of room for growth. A LIMRA study he cited pegs the number of prospective members at 100,000-plus.
To attract them, said Smith, NAIFA plans to partner with state associations that pilot membership initiatives.
NAIFA has also allied with sister organizations, including GAMA International (formerly the General Agents and Managers Association) and the American Council of Life Insurers (ACLI) to assist in the recruitment effort. A former GAMA leader will sit on NAIFA’s Board of Trustees to facilitate relationship-building between the two associations. And ACLI will serve as a vehicle via which to deepen NAIFA’s relationship with corporate partners.
“[These partnerships] should soften the beaches for our membership recruitment initiatives,” said Smith. “Our major corporate partners know that agents are the key to defending the industry’s core products. And so they’re willing to help us in the membership drive.”