Making The Transition To Brokerage
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One of the biggest challenges that tied producers face when they make the transition to operating as an independent broker is one they may not have expected: learning how to run their business.
Many career agents will tell you that when they started in the insurance business they were told "you are a businessman, and you are in business for yourself," recalls Ron Verzone, president of United Underwriters, Exeter, N.H.
"But they never taught you how to be a business person–they never taught you how to be profitable," he adds.
Michael Brooks agrees. "Most salespeople are never taught to be businessmen and women," says Brooks, CEO of Founders Financial, LLC, an independent producer group in Baltimore, Md.
Brooks explains that when a producer decides to transition to an independent brokerage business structure, there are a number of practice management issues that must be addressed. If not done efficiently, building multiple vendor relationships and managing those relationships from a business perspective can divert a brokers attention from his or her primary objective–building relationships with clients.
Working with a number of different carriers multiplies the number of administrative tasks required of an agents organization. Various applications for several different products, working with numerous illustration systems and formats, and understanding different in-force systems and client management tools all become the independents responsibility.
"For those producers who truly go direct, the question is how many of those relationships can you have and manage?" asks Steven Craig, brokerage manager for Flynn Associates, Encino, Calif.
Often, a broker is unable to manage enough carrier relationships to run an effective practice, he says, and "just keeping the software up to date is a full-time job."
"Youve got technology, information systems, client services, all kinds of things that you are now in charge of as an independent," Brooks says.
He doesnt recommend that brokers try to do this on their own. The best way to build an infrastructure to handle these issues is "to reach out to others in the industry who can bring you business and practice management knowledge," he says.
The search for this business knowledge has led independents to a number of different sources. Forming shared relationships with other professionals and organizations has become an important part of building a successful brokerage practice, he says.
"You want to be independent, but you want to have shared resources, shared relationships and shared values," Brooks explains. "The shared relationship is critical to the independent producer so he knows hes not alone."
Craig agrees. "Even the most independent producers crave some kind of affiliation. They need a place where they can learn from others and to share ideas periodically."
Jack Dewald, president of Agency Services Inc., Memphis, Tenn., feels that those independent agents who gravitate toward each other will do better than the producers who are doing it all by themselves. Independent brokers are finding affiliation opportunities in a number of different places, says Dewald, that range from formal partnerships with aggregated production to forming a study group with their peers.
Many Brokerage General Agencies (BGAs) have responded to independent brokers desire for an affiliation by adding new services and support models to their value offering. "Weve become much broader resources than we ever were in the past," notes Verzone.
Where formerly, BGAs had more of a transactional relationship with their brokers, now these organizations are offering training and support which they never offered before, explains Brooks.
