“Who in the world am I? Ah, that’s the great puzzle,” Alice asks as she sprouts into a 9-foot tall giant. The main character in Lewis Carroll’s Alice in Wonderland is not only trying to make sense of her surroundings but also attempting to determine her sense of self and where she fits into her ever-changing environment. Sound familiar?
The financial services environment continues to evolve; and within it, independent distribution has become a significant outlet for sales of life insurance and annuities.
This report focuses on the main characters within independent distribution: independent financial professionals (IFPs). It looks at how they view their practice and their surroundings, what they value from companies they work with, and their future. The findings of this study provide a deeper understanding of these individuals and help companies focus resources to best leverage this important sales outlet.
Entering the career
Why would someone enter a career in financial services sales and, more important, why would they choose to become independent? Individuals that enter financial services sales (in general) repeatedly cite income potential, the opportunity to be one’s own boss, and the ability to make a difference in people’s lives as their reasons for doing so.
It has been well documented that the financial services industry is struggling to attract and engage new talent:
• The career insurance distribution channel is often cited as the primary feeder system for the independent insurance channel.
• Banks and wirehouses are often feeder systems for independent investment-oriented positions.
• Executives from independent distribution networks (i.e., IMOs, BGAs) are pessimistic about attracting “new blood” from the pool of recent college graduates and do not see any significant increase in the number of successful affiliated agents going independent.1
• Many firms are family-run and often recruit friends and family members into the business. BGA and IMO executives see growth through cultivating individuals in other sectors of financial services such as P&C agents, real estate professionals such as mortgage brokers, security reps, and fee-based planners.2
The reality is that just half of IFPs start their career in an affiliated, employment-based position (career agent, wirehouse, or bank). As such, attracting and retaining talent is a critical issue regardless of employment status or channel.
Are we communicating the right message to make the career attractive?
The ability to generate significant income is often how companies promote the insurance sales position to potential candidates, regardless of distribution channel. Often, they only promote it that way.
However, once individuals establish practices, they recognize and value the many benefits of an insurance sales career, such as the satisfaction of directing their own business, the satisfaction they derive from helping people, a better work/life balance, and providing a broad array of products and services to meet the needs of their clients (Figure 1).
Practice profile determines the products and services the IFP needs
Approximately half of IFPs prefer to place their fixed life and annuity business directly with a carrier, and half prefer to place it through an intermediary. Both carriers and intermediaries will want to understand today’s IFP practice profile (e.g., business mix, client mix) as well as how IFPs are positioning their practices for future growth to align their offerings with what today’s practice reflects. (Figures 2 and 3).
Support the IFPs need to grow their practices
Since approximately one in four IFPs are still establishing their practices, manufacturers, BGAs or IMOs can offer more “hand-holding,” basic practice management, and focus attention on helping these IFPs grow their practices. This will help to establish relationships on the ground floor and solidify them for the long term. Firms that are more established can benefit from services that increase sales capacity and drive efficiency.
Individuals tend to sell to markets with which they are most familiar — people like themselves. There is a correlation between the IFP’s age and his/her clients’ ages. Three out of four IFPs are over age 50 and almost two-thirds of their clients are over age 50 (Figure 4).
As we will see, these results present challenges when it comes to succession planning and service. The carrier or intermediary that understands the profile of the practice can offer the most appropriate and pertinent products to align with the needs of the advisor’s client base. Carriers and intermediaries can also provide assistance to IFPs with more mature markets to identify and tap new market segments for long-term growth.
Almost one third of IFPs with an established practice and stable client base are looking for opportunities to expand business. Growth is generated by any combination of markets and products: new or existing (Figure 5).
Almost seven in 10 IFPs are looking to either offer new products or expand into new markets; 31 percent are looking to grow by selling their current product offerings to their existing markets.
The value proposition
Companies strive to be the carrier of choice to receive an increasing share of an IFP’s business, since IFPs place business with only about half of their contracted companies. The key reasons an IFP places business with a particular carrier are its ability to meet clients’ needs and ease of doing business
With all things being the same (product, service, underwriting, etc.), pricing and compensation can drive the decision as to which carrier will earn the business. However, it is in the other areas of value to the advisor where carriers and intermediaries can truly distinguish themselves to establish and cement long-term relationships with IFPs (Table 1).
IFPs consider new-business processing support to be the most important service they receive from a carrier or intermediary. However, just 74 percent of IFPs are satisfied with the amount of support they currently receive in this particular area. IFPs also place great value on marketing services, yet only half indicate they are receiving enough.
Being top-of-mind with an IFP is critical. Carriers and intermediaries that offer appealing value propositions that complement competitive product, pricing and compensation arrangements will stand out from their competition.
The future of independent distribution