It is commonly accepted that face-toface distribution within the insurance and financial services industry will continue to evolve rapidly. What is not agreed upon is how. Recently, LIMRA and McKinsey & Co. completed their latest joint research study which examined how various channels are responding to today’s environment. This study finds that some old challenges persist while new challenges have emerged. Overall, the outlook is positive for those organizations willing to embrace change, but time is running out to address some critical industry issues.
The Clock is Ticking
Two separate but related underlying trends threaten the long-term growth of our industry: sales capacity and an aging field force. While some channels have made progress, overall not enough talent is entering – and staying – in the industry to replace those retiring or leaving. Recruiting new talent in the industry remains relatively flat and turnover continues to be high, especially in the first few years. If this trend continues, it will have a significant impact on the industry’s ability to sustain profitable growth. This ongoing struggle has had additional impact: that of driving up the average age of today’s sales professional. This is especially the case in the independent insurance environment. The bulk of the independent agent force has more productive years behind them than ahead of them. Compounding the issue is that fewer career agents – the historical trainees for independent agent distribution – are following the traditional career path. Instead, they are choosing the investment and advisory environment to grow their practices. This presents a critical challenge for organizations that rely on independent insurance agent distribution: where will the agents of the future – and their business – come from?
More than ever, the aging of the field force also brings the issue of business continuity to the forefront. Assisting agents and advisors in the twilight of their career with succession planning becomes critical to provide for an orderly transition to the next generation of professionals. But sufficient transition plans are not in place. Fewer than half who are retiring within the next three years have a plan established; many have not even thought about it. Organizations must be proactive in working with these sales professionals to develop formalized frameworks that maintain and build firm value during the transition. Being proactive with senior practice leaders, identifying successors to ultimately take the reins of practice leader, is critical.
While consolidation, technology, and business efficiencies contributed to the decline in the number of insurance sales representatives, at the end of the day, there is no doubt that agent count plays a critical role in the amount of life insurance business written. (See chart.) When comparing the number of career agents with new life policy sales there is a close relationship, especially after 1985.
Therefore, it is critical that organizations bring on new sales talent, but more importantly, retain them. Firms must follow through with new hires and create an environment where they can build client relationships, develop effective sales strategies, and succeed in those critical first few years. Once established, it is very likely that a new recruit will embrace the career and become a successful long-term practitioner.
Firms must provide a value proposition beyond compensation that aligns with the needs of today’s most desired agents and advisors. Sales representatives today seek professional growth over higher payouts. They are looking for an environment that will best facilitate the growth of their practice, in a culture that best compliments their personal selling style. This is especially the case among younger agents and advisors. No longer is it just about “being your own boss” or building personal wealth. Their success model includes the desire for professional growth and development, to be part of a team versus operating as a solo advisor, the ability to contribute to the strategic direction of the firm, and to make a difference in their clients’ lives. Not that compensation is unimportant; far from it. In today’s environment, getting paid well is an expectation; it is in other areas where organizations can differentiate themselves to attract and retain the best of today’s sales talent.
The Future is Now
Forces of change among manufacturers, distributors, sales representatives and consumers have created a reshaping of distribution, an environment which presents both challenges and opportunities for today’s financial services organizations. There is a new distribution landscape, one that financial services organizations can leverage to their success. While the clock is ticking on addressing issues around sales capacity and an aging field force, nimble organizations have their eye on the clock and are taking steps to address these challenges and position themselves for profitable growth in the future.