The Chicken or the Egg?
August 6, 2012What happens to a financial services provider that invests significant amounts of capital into developing a suite of products that meet the needs and budgets of its target market, but that invests nothing in developing a professional field force that is equipped to effectively market these products to consumers? It goes broke. I absolutely believe that “nothing happens until a sale is made.” And even though I’ve only been on the life insurance side of the business for a little over four years, I’ve met with enough executives, read enough articles, and attended enough Alliance and member society meetings to know that every financial services company – commercial or fraternal – is striving (or struggling) to find solutions to the vexing problems of tapping new markets with an aging sales force and an unacceptably high failure ratio (an industry average near 90%) of new sales representatives. While the largest fraternals utilize captive agents, many societies now generate some or all of their new business through independent agents, which lowers a society’s “acquisition costs” for new producers, but can also result in a looser connection to the fraternal business model. Given that the Alliance’s consumer research demonstrates the appeal of the fraternal model to consumers in our “sweet spot” – middle income, rural and suburban, active in church or community service activities, and with children living at home – it makes sense for societies using independent agents to make sure their field force understands the competitive advantages of representing a fraternal. Unfortunately, this frequently is not the case. The Alliance’s 2011 Insurance Operations survey report found that many member societies have significant sale force issues. Many reported a shockingly low number of producers, and even those with a larger number of agents indicated that the bulk of their business was coming from only a few of them. Other societies reported a high percentage of part-time and unlicensed agents – the old “member-to-member” sales network that is no longer viable in an increasingly complex and crowded financial services marketplace. In almost every Alliance survey, member societies rank “agent recruitment and retention” as one of the key challenges they would like to see the Alliance help them address. In response to that feedback from members, we have reached out to financial advisor industry groups to learn how we can potentially provide assistance in terms of training, and recruitment and fraternal-focused education. One of the groups that we work closely with is the National Association of Insurance and Financial Advisors (NAIFA), a trade association that represents more than 200,000 independent agents committed to serving the middle market across the United States. NAIFA representatives will be on hand at the Alliance Annual Meeting next month in New Orleans, providing member societies with information on the best ways to tap in to NAIFA’s pool of professional financial advisors. Likewise, the Alliance will be an exhibitor at the NAIFA meeting in Las Vegas (which begins the day after the Alliance Annual Meeting wraps up). Our booth will feature materials about the Alliance, the appeal of the fraternal business model to consumers, and the benefits for agents that represent fraternal life insurers. In addition, I’ll be conducting a presentation entitled “Tap New Markets: Learn How to Transform the Appeal of the Fraternal Business Model into Increased Sales” in the exhibit area on Monday, September 10, from 1:30-2:00 p.m. I’d like to invite Alliance members to participate in this exhibit by providing us with important information we can distribute at our exhibit booth. Any member who wants to provide specific salesperson contact information for inclusion on the list handed out at NAIFA – so that agents wanting more information on your financial products have someone to call directly – should send a note to firstname.lastname@example.org. This is the first step in a concerted effort by the Alliance to take our very positive message about the appeal of the fraternal business model to the individuals who can have the most dramatic impact on our future – the “true believers” who have the ability to effectively market our products, benefits, and philosophy to the people who will inherently understand the value proposition we offer.