Heading off a creeping crisis: exit planning for independent agents & advisors

From compliance to prospecting, life insurance agents and advisors are buffeted by challenges as never before. Among them, one is getting too little attention: succession planning.

For the industry, it’s potentially the most serious of all. This creeping crisis could soon reach a crescendo because of an aging industry workforce. The average producer is in his or late 50s, so retirement for many is not far off. Yet, too few of these financial professionals have planned for their exit.

When they do leave the business, there may have no one on staff to serve the orphaned clients they leave behind, not to mention the many middle market prospects who urgently need insurance and financial planning.

Fortunately, more industry-watchers are sounding the alarm on this nascent problem. One I interviewed at NAILBA 34 — the National Association of Independent Life Brokerage Agencies, which held its 2015 annual meeting in Orlando, Nov. 19-21 — was LIMRA Associate Research Director Laura Murach, who focuses on independent distribution.

The need for transition planning to the next generation of producers, she noted, isn’t just because boomer-age advisors are entering their golden years. Murach’s team recently surveyed some 20 brokerage-general agencies (BGAs) and found that nearly half of their producers (49 percent) started their careers as independent agents. The traditional “feeder” system for the independent channel — carrier-operated career agencies — now accounts for just 51 percent of all new agents and advisors.

That shift is concerning in part because independent producers enjoy less access than their career agency counterparts to the start-up sales training and support they need to build and operate successful practices. They’re also disadvantaged financially relative to their captive peers, as they can’t count on a salary-like compensation (or “draw”) to keep them afloat for the temporary period needed to transition to a commission structure.

Compensation aside, some BGAs are availing their independent producers of best-in-class training and support, often in partnership with an independent marketing organization. Partners Advantage is one example of such a firm. James Wong, a senior vice president for the organization and a panelist at NAILBA 34’s opening general session, detailed an impressive array of virtual educational tools — blogs, podcasts, webcasts and instructional videos — that producers can access via Partner’s web platform.

But such cutting-edge resources are not as widely available as they should be. To be sure, independent producers can tap into other industry resources to learn about best practices and tips. The Million Dollar Round Table (MDRT) and the National Association for Insurance and Financial Advisors (NAIFA), among other organizations, offer top-notch professional development content at their annual meetings and (in NAIFA’s case) at local chapter gatherings.

Particularly relevant in terms of succession planning is mentoring. The MDRT has a long-running program to help aspiring MDRT members attain MDRT production levels and gain admission to the organization by teaming them up with industry veterans.