Why BGAs Must Own Retail
Why BGAs Must Own Retail
Today’s independent distribution channel faces extinction as a wholesale entity due to it’s inability to recruit agents who may not be loyal.
Today’s independent distribution channel faces a strategic inflection point over the next 5-7 years. For the first time, a dramatic dearth of new agents entering the business is seemingly outside of the control of the industry’s distribution channel, and firmly in the hands of the carriers. The primary reason is, BGAs cannot put resources into recruiting agents in the traditional model because they may or may not be loyal. As a result, the only recruiting that is occurring is happening on the captive side while the independent channel seeks non-traditional ways to grow (wire houses, financial advisors, etc).
With fewer life insurance agents entering the industry and more existing producers slowing down, the market for the attention of ever fewer agents is increasingly competitive. BGAs have had to pay higher commissions while focusing on consolidation and volume.
When our market changes fundamentally, we must change with it. As our ancestors did, we too must adapt or risk extinction. We in the brokerage general agency channel do not have the resources to recruit new independent agents en-masse if the agent may or may not be loyal. There then seems to be two alternatives: we recruit W-2s, or we hope carriers will recruit more. But won’t the latter increase the likelihood that we are decimated as a channel since they, too, will want to ensure loyalty through captivity? If we are to stay relevant, we must take a proactive approach to continuing to own the distribution channel – there is no other option. If we are to have product manufacturers and retail remain independent, then we must become retail, otherwise manufacturers will become retail out of necessity.
We can look to Canada where we have already helped GAs to identify, value, and buy producers’ blocks of business proactively to take ownership of the client relationship and the inforce policy. That process allows independent distribution to remain deeply relevant as agents retire – in fact, to become even more relevant as the current sales force retires rather than less relevant.
So given the requirement that we focus on marrying retail and wholesale, the question becomes who services those blocks while developing new business? Well, the existing business that you buy has inherent new business potential. There are immediate revenue opportunities such as conversions, 1035s, GPOs, upselling, cross selling, and new needs, which allows your agents learn on the job by talking intelligently about existing products. We do need to recruit and hire agents – and that means W2s, not 1099s – then train them as efficiently as possible to service the blocks that we have, thereby creating the revenue and margin necessary to further recruit.
As our agents begin to focus deeply on developing those relationships to drive openings to the connections and families of the existing customers – both through old fashioned referrals and through modern technology, we start to see how “independent” can remain that way.
The future of the independent agency is bright – in fact, the future is one that we shape. It requires a series of tough decisions including capital outlay by acquiring meaningful assets – blocks of business – and new responsibilities – monitoring policies and hiring agents internally. As a twenty four year old I believe I’ve been lucky enough to see this strategic inflection point take shape and I firmly believe that technology, along with demographics, will continue to shape the industry along these lines.