Finding successors still an

The days of the big, captive-company training program run by insurance carriers are long gone. While few advisors miss the “captive” part, many are left scratching their heads, pondering where the next generation of insurance agents will come from.

“It’s quite obvious that this is a quite urgent issue facing the industry,” says John Lutrin, executive vice-president at HUB Financial. “I’d probably go so far [as to say] that it’s a crisis. There’s a clear trend toward an aging demographic in the advisor base.

“What are we doing, as an industry, to create the next generation of advisors into the business?” he asked the audience at the third annual Changing Channel: Managing General Agencies Symposium in Collingwood, Ontario. “The answer to that, unfortunately, is ‘Not a hell of a lot.'”

The desire for a fresh cohort of highly trained insurance advisors is not entirely driven by concerns of an underserved future market. Many advisors in this channel are reaching a stage in their careers where they are looking ahead to retirement and would like to fund their golden years by selling their practice.

As with existing advisors, MGAs recognize the importance of training a successor generation — without it, their businesses would be in jeopardy; as well, the sales force would dry up.

“Running an MGA is kind of like running an NHL team,” says Casey Brandreth, principal of Daystar Financial Group. “To run a successful NHL team, you need to have a farm team. Right now, the farm team is dwindling. The question remains: where is this talent going to come from so that this continues to be a viable industry?”

A few career shops remain — Clarica and Freedom 55 Financial — but training the next generation of independent insurance advisors has fallen to the Managing General Agency.

Research recently conducted by the Advisor Group found that 28% of advisors would like to receive assistance in the training of new and junior advisors, but only 14% said their MGA was offering any assistance. The trick for the MGA, however, is to find people who they can train.

Brandreth says much of his firm’s recruiting is from among existing advisors, rather than complete rookies. These advisors have the business background, making it easier to train them in insurance. Besides, many new entrants to the financial services industry are attracted by the more glamorous world of investing and often end up overlooking the insurance side altogether.

Training new recruits can be an uphill struggle, as many recruits simply are not up to the task. Bruce Tetz, vice-president, Financial Management Brokerage, says that of his current cohort of trainees, two-thirds are struggling. Considering the cost involved in training, this can be a frustrating situation.

“Right now we’re still learning how to do this. There is not a model in the MGA world,” he says. “The old career agency system worked quite well for bringing in multiple people, shaking that sifter and then getting three or four nuggets out of that.”

Part of the problem in attracting new talent from outside the industry is the spectre of the lean years as the advisor gets their feet. While the industry may appear attractive from the outside, it is unrealistic to expect instant success.

Tetz says it takes about four years for the newly trained advisor to pay off, at a training cost of between $200,000 and $300,000 over that period.

There is some help from the carriers who recognize the need for training but are not willing to undertake the program themselves. Empire Life, for example, has a cost-sharing program, offering a higher override to the MGA for business placed by new advisors in their early years, which declines as they gain experience.

Making the entire proposition even more risky is the chance that after all the training, the new advisor may end up crossing the street to another MGA who offers an extra 10 points on compensation.

The risk of defection is ever-present, but Brandreth says the risk is greater for the MGA who does not provide the assistance the retiring advisor needs. Many advisors are still uncomfortable discussing their own succession planning, even as the population ages, but Brandreth points out that eventually they are going to want to slow down.

“If we don’t pay attention and help these guys find successors, some of these clients are going to be served through another entity,” he says.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(06/13/07)

Steven Lamb