Team approach breeds sales success

If you’re an advisor heavily involved in insurance sales, you may be well served to bring on a partner advisor to increase both of your sales, a study by LIMRA suggests.

According to a study of top insurance producers conducted jointly by LIMRA and McKinsey and Company, advisory practices composed of multiple members have much greater sales success per advisor than the traditional lone-advisor sales model.

“If we looked at people who were in a low-support relationship — that is to say, they represent one rep and maybe a support staff person versus a high-support model — we demonstrated through our research that there was a 39% increase in earning power for advisors in a high-support model,” James W. Kerley, president of the U.S.-based LIMRA Services, told a group of assembled distribution professionals at LOMA’s annual conference in Toronto.

Kerley made the argument that the entire insurance industry could see its sales capacity drastically increase if the solo-shop and low-support practices either migrated to a higher-support platform or teamed up with other advisors in a multi-advisor platform. Currently, more than 70% of North American insurance advisors are working solo or are in a low-support environment.

More than 70% of the insurance sales force is also over the age of 50. Increasing sales capacity, particularly in the independent channel, is crucial to the industry maintaining strong sales as advisors move into retirement.

In fact, the sales success potential — the ability to achieve top-quartile performance — of an advisor who migrates from a solo practice to a multi-advisor practice increases by nearly three times, Kerley pointed out.

Banks favour multi-advisor model

What’s surprising is that only 9% of the industry uses the multi-advisor model, with much of that penetration in the bank channel.

“As we look at the definition of those relationships by channel, it was interesting to note that the banks are the largest in terms of percentage of using this business model,” Kerley says.

It may be a coincidence, but the bank and career channels have done much of the recruiting and grown sales to offset the departures of that aging independent distribution network. Kerley says the average age of advisors in the bank channel is 40.

According to the LIMRA study, there’s been a stark reversal in the distribution sales growth, compared to 1998-2004 — the era of demutualization and consolidation — when growth in distribution came from the independent broker channel, which saw sales capacity increase by a whopping 31%.

Sales capacity in the independent channel has decreased 7% since then, and the affiliated/career channel has seen its sales capacity grow by 4%.

It’s not only a matter of recruiting that’s helped career forces grow; migration from the independent channel to the career channel seems to be on the rise. At least three major carriers have exited the independent sales channel in the U.S.

Kerely suspects that the multi-advisor model used in the affiliated sales channel also has considerable appeal to experienced advisors who are looking to streamline costs, such as compliance, and build skills through mentorship. Assuming a multi-advisor practice is composed of advisors of varying ages, it can also provide an easier transition plan. A younger colleague will already be familiar with the client base.

“There is a very specific advantage to migrate your producers to team-based relationships. What it demonstrates to me is that the earning power will clearly be an incentive for experienced advisors and will allow for a separate discussion on topics such as succession planning,” Kerley says.

The demographics of success

Generally, advisors who enter the business at a younger age do much better in the long run, but early sales success goes to advisors who enter the business after the age of 30. Recruiting younger advisors only pays off if the senior partner is willing to wait the seven years it takes, on average, for the junior partner to maximize his or her sales capacity.

On average, advisors between the ages of 30 and 39 earn $82,000 versus advisors ages 20 to 29 who earn $59,000. Those advisors who enter the industry in their 30s with seven years of experience earn over 40% more than their contemporaries.

Kerely says dealers have to decide when recruiting if they want to invest in long-term success or immediate sales growth.

“One question [dealers need to ask] is how fast do you want to get a group of advisors producing? If you want immediate production growth, this study would suggest an older age group is going to get you faster production. What is the length of that investment?” Kerley says. “If I can get somebody who is 25 versus 35, that will probably get you additional years of productive sales growth.”

The required sales support of higher producers also suggests that there is a much greater need for improving application and underwriting processes. More than one-quarter (28%) of the survey’s respondents identified better technology as their most important need. A further 23% identified- a need for better back-office services.

The study found that top producers want less product training, consolidated reporting and compliance support. They want better access to client records, more advanced sales support and improved back-office support for servicing clients — including better electronic submission of client applications and online access to application status.

(06/17/09)