The blockbuster February 29 announcement about MassMutual’s $300 million purchase of the MetLife Premier Client Group and related assets from the New York-based behemoth set the industry abuzz. The acquisition of the group — a major retail distribution channel for MetLife — brought into stark relief regulators’ growing impact on insurers.
Both MetLife and American International Group (AIG) are notably concerned about increased compliance costs in connection with: (1) being tagged systematically important financial institutions or SIFIs; and (2) the Department of Labor’s proposed fiduciary regulations for retirement advisors, which market-watchers expect to go into effect this month.
AIG CEO Peter Hancock cited the DOL rule in in a January conference call with investors expanding the carrier’s plans to sell its broker-dealer unit. MetLife CEO Steven Kandarian echoed Hancock’s comments in a press statement about the Premier Client Group sale.
“By decoupling manufacturing from distribution, our U.S. retail business will be more agile, and both MetLife and the U.S. retail business can achieve significant cost savings,” he said. “This transaction will enable our U.S. retail business to sharpen its focus on its core strength in product manufacturing while also providing a broader distribution network through the partnership with MassMutual.”
That network — a retail distribution channel comprising more than 40 local sales and advisory operations and approximately 4,000 advisors nationwide — promises to transform MassMutual into a “distribution powerhouse,” as MassMutual Chairman, President and CEO Roger Crandall asserted in the joint February 29 press statement.
Whether MetLife will similarly benefit from the transaction — Kandarian claimed the sale will enable MetLife to “sharpen its focus on its core strength in product manufacturing while also providing a broader distribution network through the partnership” — remains to be seen.
This much is clear: MetLife is divesting itself of a major distribution asset, one that has grown in value since the insurer renamed its individual distribution organization MetLife Premier Client Group in October 2013. As part of the rebranding, MetLife has standardized the consultative sales process used in client engagements. The insurer also revamped its “Regional Organizational Model” to enable the group’s insurance and financial service professionals to work together in teams.
To learn more about the initiative, LifeHealthPro Senior Editor Warren S. Hersch interviewed (prior to the February 29 announcement) MetLife Premier Client Group Executive Vice President Paul LaPiana; and Bellaria Jimenez, a managing partner of MetLife Solutions Group, whose advisors are participating in the teaming program. The following are excerpts.
Hersch: What prompted MetLife to bring advisors together in teams? What does the company hope to achieve?
LaPiana (pictured at right): It’s very difficult to be successful as a solo advisor today because there’s so much you need to know, both in respect to wealth and risk management. So we’re partnering agents and advisors with other financial professionals that have complementary skills.
For example, I might specialize in insurance and risk management. A second advisor would focus on wealth management and investments, whereas a third would do financial planning. We might also have a CPA and attorney on the team to handle accounting and estate planning issues.
Hersch: Are all team members MetLife employees? What products can they sell?
LaPiana: They’re all company employees and will recommend MetLife solutions where appropriate. But they’re free to sell third-party protection products — life, disability income, auto and home insurance, plus annuities and investments. Our open-architecture platform lets them offer clients unbiased solutions.
Also available to the teams is a group that can offer guidance and solutions in cases requiring advanced planning, such as the establishment of a trust for a disabled child or an incapacitated spouse. The advanced planning group will typically coordinate with the client’s attorney and tax professional.
Hersch: How many advisors in the Premier Client Group are part of a team?
LaPiana: Of the group’s 4,000 advisors, about 1,000 — roughly 25 percent of our advisor force — participate in 300 formal teams. We’re formalizing 170 emerging teams for another 400 advisors, or about 10 percent of our advisor force. The majority of advisors are still solo practitioners, either because they’re just starting in their careers or because a team isn’t right for them.
But it’s safe to say that about 50 to 55 percent of our group will be part of a team within the next three years. We truly believe this is the way to be successful — to bring the right amount of value to clients.
Hersch: How do you determine whether someone is appropriate for a team?
LaPiana: We have a group of 12 to 14 home office people who educate advisors on why teaming is appropriate for growing their practices and bringing more value to clients. Those advisors who express interest are connected with a national team that does an analysis of their strengths and weaknesses.
They then look for other advisors, both internally and outside the company, who might offer complementary skills on a team. Thereafter, we bring team members together to do joint work and see if there is good chemistry — trust, values and a work ethic that will allow the team members to work together productively.
Hersch: How does the MetLife Premier Client Group differ from the advisor network the company had in place previously?
LaPiana: Four years ago, we had three businesses: (1) MetLife Career Channel; (2) New England Financial Channel; and (3) MetLife Resources. In 2013, we merged the businesses — rebranding the combined unit as MetLife Premier Client Group — and placed advisors on a common broker-dealer platform, compensation plan and recognition program.
Along the way, we made structural changes to focus our resources on the right management teams and advisors. The great news is that we’re doing more business today — with less management and fewer advisors — than when we started on this journey. Our team advisors typically generate from 1.5 to 2 times the revenue of solo practitioners in the company.
They’re also doing more comprehensive planning for clients. That leads to greater share of wallet and more product sales. So teaming has been a big part of our growth and gains in advisor productivity.
I should add that teams also permit greater continuity. When an advisor retires, other team members can step into service the client. So it’s not as big an event.
From a headcount perspective, the plan is to continue to grow the group by 50 to 100 advisors annually, the increase taking into account advisors who retire, move to another firm or who decide that teaming isn’t right for them.
Hersch: Point noted. But given that advisors are all employees of MetLife, have clients voiced concerns about their ability to offer objective advice?
LaPiana: It hasn’t been a big concern of clients because, again, we’re on an open architecture platform. We offer products from all the major carriers on the annuity side, both fixed and variable, plus major life insurance products. On our broker-dealer platform, asset managers can recommend third-party mutual funds.
Our advisors will tell you they always strive to ensure the clients’ goals and objectives are met. Yes, MetLife manufactures really good products; and if they’re suitable for the client, then we’re proud to recommend them. But we have a very good mix of proprietary and non-proprietary solutions. So questions about objectivity aren’t surfacing a lot.
Hersch: To your earlier point about continuity, is there a succession planning program in place to replace advisors who retire?
LaPiana: We do have a succession planning group within MetLife that can help advisors with a range of needs as they prepare for retirement. These including valuing their practices, transferring renewal fees and trailing commissions or financing the purchase of the practice by other team members. The group can also assist with the drafting of exit planning documents.
We’re also working very hard to get advisors to be proactive and start succession planning early. To that end, we have a recruiting program to bring in people from outside the company — both experienced and inexperienced advisors — who can provide skills and expertise needed by a team.
Hersch: How are team members compensated?
LaPiana: Some teams use an MDRT [Million Dollar Round Table] methodology whereby compensation is split according to function. One advisor who sources the client might get 20 to 30 percent of revenue. A second who drafts and implements a financial plan may receive 30 to 50 percent. A third advisor who services the case could get 20 to 30 percent.
Other teams use a law firm model, wherein the lead advisor on every case gets a fixed percentage — say 50 percent. A less experienced advisor might take home 30 percent; new recruits might receive 10 percent each.
Over the years, we’ve changed percentages based on who is developing, implementing and servicing the client’s business. There are different revenue models, but to be on a formal team, we’re now requiring that 70 percent of revenues, both fees and commissions, be split among the team members.
Hersch: Bellaria, tell me about MetLife Solutions Group and how teaming has helped your advisors.
Jimenez (pictured at right): As managing partner, I run one of our larger MetLife firms in the Greater New Jersey area. Before teaming was formalized, we were already partnering advisors within our organization. What the Premier Client Group has done is allow us to have a structured program. And that’s enabled our teams to operate more as business profit centers.
Of our 175 advisors, 97 of them are currently on teams; others in the group prefer to work solo. We want to continue to grow the teams we now have, either with new advisors joining or existing advisors who find it to be a good fit for them.
Hersch: How are the teams structured? What distinguishes them?
The average team has about 5 advisors. Each has a different target audience and may have a different business focus. But for the most part, teams will have an experienced advisor who usually serves premier clients; other advisors will focus on a specialization, such as auto and home, life or DI. Or they’ll have particular expertise, such as marketing or client-relationship management.
Hersch: Have you introduced changes to the teams since they began?
Jimenez: There is an evolution underway. We’re always reviewing how well the teams are functioning — and so asking questions. Do they make sense as currently structured? What’s working and what’s not? Are they productive and meeting their goals? We particularly look at opportunities to better structure teams when new advisors join the company.
Hersch: Can you illustrate for me how advisors working collaboratively might add value for a client?
Jimenez: An advisor would typically work with a client on an area of planning — say, developing a retirement strategy — that’s the advisor’s core competency. During fact-finding, the advisor may identify other planning gaps.
Colleagues on the team will then will review the client’s financial situation and provide additional input. They might note, for example, that the client’s auto & home policy hasn’t been reviewed for a very long time.
These policy reviews have yielded a lot of new business. And they’ve provided peace of mind for clients concerned about future potential losses, particularly in the wake of Hurricane Sandy in 2012.
That’s a huge value-add that the teams were able to provide. In addition, we’re looking at cross-generational opportunities. Often, for example, we have young advisors who will work with clients’ children to prepare them for the transfer of assets in an estate plan.
Hersch: What plans do you have underway to grow the group practice? Which planning areas do you see as most promising?
Jimenez: We see a lot of opportunities in the small business market. We work with individuals in these markets, but entrepreneurs also have business planning needs. So we’ll review ways to grow assets for themselves and their employees.
These are areas where our teams can add a lot of value: Many have specialists well versed in aspects of business planning, such as executive compensation, group-wide employee benefits or succession planning. Because there are so many small business owners in New Jersey, this market has become an important growth area for us.