How one advisor raised $50M to reinvent the IMO in Detroit
In the heart of the Motor City — a town not known as a hotbed for insurance innovation — a young company called Signal Advisors is hard at work.
Patrick Kelly, 31, now the co-founder and CEO of Signal Advisors, started his career as a financial advisor. In just a few short years, Signal Advisors has managed to raise tens of millions of dollars from some of the nation’s most successful entrepreneurs and investors. So what is the secret to Signal’s success?
“We are building this company for advisors. It’s that simple,” says Kelly. “Step one, we listen to our advisors. Step two, we build the technology and services they are asking for. Step three, we repeat steps one and two!” Kelly says with a smile.
From Financial Advisor to Startup Founder
Signal was far from Kelly’s mind when, as an undergrad at Michigan State University, he took his first job at Northwestern Mutual. It wasn’t long before Kelly left the captive insurance world and became an independent advisor, partnering with his mother Janie Kelly to build Kelly Capital Partners. “The firm is actually stronger than ever today,” Kelly remarks proudly.
Learning from his pain points as an insurance producer, Kelly went on to create a second company, RepPro, where he built the first electronic application submission tool for the ballooning fixed-indexed annuities market. He knew nothing about software development, but he knew what advisors wanted and, more importantly, what they needed. RepPro soon
received backing from Advisors Excel and Annexus Ventures. RepPro ultimately became part of the Annexus family and was merged with RetireUp, a maker of retirement planning software.
“We poured our blood, sweat and tears into building RepPro. I must have personally met with thousands of advisors and maybe 100 IMO’s” Kelly recounts. “I’m proud of what we accomplished, but I certainly left that experience feeling like I had unfinished business as an entrepreneur.”
Raising $50M to Play the Long Game
To Kelly, experiencing the industry’s challenges firsthand is what provided the insight to build Signal. “I had been a financial advisor for most of my career. I’d been captive, and then independent. We started with life insurance, then annuities, and then added managed money. We were evolving our practice over the years, and I realized that these IMOs needed to evolve too.”
Having partnered with industry leaders in the IMO space at his startup, RepPro, Kelly had high standards for Signal Advisors. “We knew we needed significant resources to build something truly unique.”
Raising money from venture capital investors is not a common path in the IMO world. Kelly believes that this capital will allow them to build a better platform for advisors because they can be long-term oriented, rather than always seeking short-term profits. One of their early investors is Dan Gilbert, through his fund Detroit Venture Partners, and Gilbert certainly knows something about playing the long game. Gilbert, founder of Quicken Loans (now Rocket Mortgage), started his mortgage company as a young man in Detroit over 35 years ago.
In order to reinvent the IMO, Signal Advisors is changing the underlying business model, by eliminating the traditional “marketer” role, and replacing it with teams of experts, as well as leveraging practicing advisors as coaches. Kelly recalls from the first days at Signal Advisors, “When we started the company, we asked ourselves, 'How do we invest less in marketers and more in our advisors?'” Marketers can consume upwards of 25%-50% of an IMO’s operating budget, Kelly says. “If you really want to reinvent the IMO, you have to follow the money”.
Founding Team with a Fresh Perspective
Signal’s founding team is made up of an unusual mix: Jacob Cohen, a venture-capital pro who ran Dan Gilbert’s venture-capital fund for 10 years, Kevin O’Hara, a successful CTO with 18 years’ experience, and Kelly, who brings the advisor’s perspective. “Our DNA is different,” says Kelly. Other firms may emphasize their marketing or wholesaling chops, but Signal brings to the table “skills and perspectives you don’t normally find at an IMO.”
Reinventing an Industry and a City
Kelly is having fun pushing the insurance industry forward. “‘We’re not in Kansas anymore’ I love to say, although I know it’s cheesy,” Kelly jokes, quoting Dorothy entering the unfamiliar land of Oz. “There is a brave new world out there where IMO’s can leverage technology to serve advisors in entirely new ways,” explains Kelly. “Plus, we are headquartered in downtown Detroit, while many IMO’s and insurance companies are in Kansas, so it has a figurative and literal meaning for us!”
But while Kelly loves to have fun, he is serious about the impact that Signal Advisors can have on his hometown of Detroit. “There are so many great stories about IMO’s who have positively impacted their communities. I hope we can have that kind of long-term impact in Detroit with Signal Advisors.” Kelly loves it when advisors fly to Detroit and get to see the city for the first time. The Signal Advisors offices are located in the heart of the city, with views of Comerica Park, Ford Field and Little Caesars Arena. “We can walk to baseball, hockey, football and basketball…not a bad location to build a company!”
Playing the Long Game
Despite Signal’s recent traction, Kelly doesn’t claim to have all the answers. “We don’t pretend to be smarter than other IMO’s, but we have the benefit of a clean canvas, and the resources to invest for the long term.”
“Building a great company is a 20+ year marathon. It’s certainly not a short sprint to quick profits. Our investors are as long-term-oriented as we are,” Kelly explains. “With this new capital, our advisors know we will always be able to continue to invest in innovation for many years to come.”