The U.S. economy may be heading into a tailspin, but the prospect of a long and painful recession hasn't stopped life brokerages agencies and independent marketing organizations from building out their businesses in 2008. Whatever the nation's financial woes, sources tell National Underwriter, substantial investments in people, technology, geographic reach, marketing budgets–and, yes, fattened commission checks for producers–were critical to helping these middlemen keep pace in an increasingly competitive marketplace.
"The critical mass needed just to stay in the game is getting so high," says S. Reed Ashwill, president of Borden Hamman Agency of Dallas, Tex. "We have to do so much more in production to stay at the same level that we had to change our business model."
Adds John Bulbrook, CEO of Wellesley, Mass.-based Bulbrook/Drislane Brokerage: "There may be a recession, but we're choosing not to participate in it. To succeed in this business, we've got to meet more people and work smarter. There's no other way."
Amid the credit crisis and economic contraction, IMOs and brokerage agencies reported mixed financial results. Jeff Cassat, a chartered financial consultant and vice president of marketing at Capitas Financial LLC, Minneapolis, Minn., notes that sales for the year were flat. Revenues from the firm's national accounts (wire houses, banks and brokerages) were up, but revenues from the agency's channel of independent advisors suffered a dip.
Likewise, Gary Baker, president of Baker & Associates Insurance Agency, Scottsdale, Ariz., reports that, following a "fabulous" first quarter, sales steadily declined in the second and third quarters of 2008 owing to the deteriorating economy. But he expects to close out the 4th quarter with a 70% increase (though down 25% for the year in comparison to 2007).
To the extent that IMOs and brokerages enjoyed gains, sources say the souring economy–and clients' concerns about their own shrinking nest eggs–actually contributed to the positive performance. Among those taking this contrarian view is Bulbrook/Drislane Brokerage, which enjoyed "excellent" sales of fixed annuities.
"Since the onset of the financial crisis, we're seeing more new policy applications than ever before," says Bulbrook. "Because of declining stock portfolios people are worried and they want something safe. Also, the rates on fixed annuities are now superior to those offered on CDs."
The attraction of "safe" insurance products in tough times is not confined to clients. Cassat says many affiliated investment professionals have expanded their portfolios and expertise to encompass life insurance-funded estate planning and executive benefit solutions because of the revenue potential. Among his best national accounts, Cassat counts registered reps employed at UBS, Morgan Stanley and Wachovia.
Life brokerages agencies and IMOs had more than a faltering economy to contend with this past year. Market-watchers say that an increasingly competitive landscape has forced many of these firms to overhaul their business models with a view to achieving greater economies of scale, adapting to the needs of a more mobile and technology-savvy field force and strengthening relationships with producers.
