Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Steven A. Morelli
The future for insurance wholesalers is to stop seeing themselves as the processor between insurance company and advisors and step into the full-service role that some carriers used to occupy, according to a speaker at a NAILBA session on Friday.
Successful brokerage general agencies (BGAs) and independent marketing organizations (IMOs) are trying to solve the advisor shortage problem by doing what many insurance companies used to do, said Richard Weber, president of The Ethical Edge, a financial planning and insurance agency that Weber also describes as an insurance fiduciary.
“Today’s BGAs and IMOs are yesterday’s behemoth insurance companies that had legions of agents selling their policies,” Weber said. “So the behemoths by and large don’t train any longer. They don’t recruit from the colleges.”
Weber is giving a BGA-only presentation on The Ethics of Selling Indexed Products at the National Association of Independent Life Brokerage Agencies’ annual meeting. He spoke about BGA- and industry-related issues with InsuranceNewsNet before the session. Weber is also the president of the Society of Financial Service Professionals.
As carriers retreat from the agent caretaker role and producers become scarce, the BGAs’ role is expanding to fill the vacuum – or the most successful ones are, Weber said.
“The smarter BGAs that are focusing on the future are offering training,” he said, adding that they are also offering advanced planning services. But they are also taking on another dimension, one dear to Weber. “They’re taking ethical positions with respect to business they’ll accept and business they won’t accept.”
The high ground isn’t just in what business they will take but how they do business.
“They’re starting to realize that they have to be able to offer more than just a basis point higher commission in order to get my business,” Weber said. “In fact, I’m very leery of the BGA or IMO that’s offering the absolute top possible commission level, because I know that I’ll get cash but I’m not going to get anything else.”
Advisors need guidance and information in order to grow their business. If they don’t get that from BGAs, their options are limited. It is important enough that advisors would even trade a little bit of the compensation for more direction.
“At this point in my career, I’m happy to pay for this BGA to hold meaningful seminars on new product developments, new applications of products or emerging issues that consumers are facing.
Ten to twenty years from now we’re going to see BGAs taking up the best things that insurance companies of 30 years ago did, which was recruiting, training, nurturing and mentoring.”
How big could BGAs get? Weber said he sees some taking slots in the top 25 companies with tens of thousands of advisors, especially if they break out of their regions and go national.
“I think the BGAs are going to be the new behemoth insurance companies.”
Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at email@example.com.
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