The aging of the independent advisor channel combined with a chronic lack of recruitment has made Canada’s managing general agencies (MGAs) keenly aware of the importance of protecting their advisor networks from the competition.
Byren Innes, senior vice-president and director of NewLink Group, a Toronto-based firm that conducts financial services research and provides strategic advice, says it is critical for MGAs to deliver the tools and services that their advisors want, or they will get them from the competition. He says that to protect their advisor base, an MGA must always be thinking, "What can I do to keep my guys part of the team?"
This question is important because even though insurance advisors can place business with multiple MGAs, they tend to do 90% of their business with one MGA, explains Mr. Innes. In order to maintain and protect strong relationships with advisors, MGAs must offer them what they want, he says.
But, what do advisors want? Neil Silverman, executive consultant with NewLink, said a study carried out last year by the firm showed that service was the key attraction for advisors.
He adds, however, that not every producer is looking for the same types of service, or business model. So, an MGA has to determine, "How do I position myself?" MGAs, he says, must build a value proposition to attract new advisors or keep the ones they have.
If you don’t have a value proposition and don’t want to invest in one, then what’s left is to compete on compensation to advisors, which is not good for their financial viability, Mr. Innes adds.
Keith Brown, co-president of Daystar Financial Group agrees that MGAs must offer advisors a clear value proposition. "What we’re doing is trying to build a fence around our advisors."
Daystar conducted a survey among its advisor network to find out what they are looking for from his firm. Education came out on top. "Our advisors value information. They want education." To provide this, Daystar offers enough educational seminars to enable its advisors to obtain 60 continuing education credits. The firm also offers training programs for its advisors’ marketing assistants.
Mr. Brown says other services such as proprietary software solutions to illustrate advanced cases, underwriting assistance, access to a tax and estate planning specialist, and sales support from himself and partner Rene Pereux, are also part of Daystar’s value proposition. "We’re trying to free up advisors and give them more time to sell."
Jim Virtue, president and CEO of Financial Management Brokerage Group says he works hard to strengthen his firm’s value proposition to advisors. "The first principle that we operate under is that advisors have local, personal service. All our offices provide brokers with assigned individuals that assist them with policy issue and policy owner service."
Training is also part of the MGA’s suite of offerings. "All of our offices conduct extensive broker educational seminars. As an example, in Calgary we offer in excess of 150 CE credits per year, with similar programs being delivered nationally in our other offices."
Technology based tools are also an important part of the firm’s service to brokers, Mr. Virtue adds.
Financial Management Brokerage is part of BridgeForce Financial, a group of "like-minded MGAs that work together to provide software, back office technology, training and other administration services," he explains. Mr. Virtue says that his company "is one of the leading MGAs in providing electronic segregated fund trading to our brokers." Electronic trading is a superior method to the paper-based manual approach used by many smaller MGAs, he says.
Allan Bulloch, president of IPG Insurance, says that the MGAs who cannot afford or do not want to invest in technology platforms, advanced case support, training and other services, will have to compete on compensation. IPG has found that its advisors appreciate service support. "If you’ve got a very good value proposition, the good advisors will not leave you because of compensation. They recognize the value. If they don’t, we say ‘Go elsewhere’ and we help them."
Mr. Bulloch says succession planning and recruitment is also an area where IPG is trying to support its brokers. The average age of advisors in his network is 52. Last year the firm created a succession planning program in which 100 advisors took part. Advisors are aware that they need to plan for their succession, but many have neglected to deal with it, he says. The intent of the program was to show the advisors "here are the options, here are the solutions, not just depress the hell out of them," he says.
The result of the program was that two advisors sold their practices within the network and 15 brand new associates were brought in by advisors who had recruited them as part of their succession plans.
Mr. Brown of Daystar is also highly concerned about the lack of new blood entering the business and his firm is gearing up to help do something about it, he says. "The future of our industry is really in jeopardy."
The MGA’s plan, which Mr. Brown says will be rolled out beginning in 2010, will involve bringing in eight to ten new recruits across Canada each year.
"Our goal is to increase recruiting of brand new green peas into the profession."