NEW ORLEANS – When Stephen N. Ashton started out in the life insurance business, his challenges made him acutely aware of two problems the industry faces. This led to creating an agency perpetuation system that his brokerage now uses — one that helps new recruits get in front of quality prospects and helps older agency owners develop a business succession plan.
He identified the problems — and the solution — during a talk here at the annual meeting of Million Dollar Round Table. The story provides a revealing look at the industry from a young advisor’s point of view.
In 2002, when Ashton entered the business, he had few things going for him. He had just completed his college degree and joined his fathers’ successful life insurance agency, as did his three brothers before him.
They’re all broke
But he soon realized he had a problem: Most of the people he knew were “all broke.” Like him, most were also just starting out in their post-college lives, and they were in no financial position to make major investments or insurance purchases.
This is an industrywide problem for young agents. Some get by though selling $300,000 term life policies, but, after expenses, “you can’t make jack” on that, said Aston, who is an advisor at AFG Brokerage in Othello, Wash., one of the family firms.
Ashton also saw a related problem for agents just starting out. This was that “mature” (older, experienced) life insurance advisors have built up so much business that they have no time to serve all their clients. So the mature agents keep up with the top 20 percent and do the minimum with the other 80 percent.
“For me, I would have liked to have the opportunity to work with those other clients,” Ashton said. His father did have an “80 percent” group. The problem was, his father was not going to turn over all those accounts to Ashton.
Make your own pie
His father was willing to teach and train, Ashton said. But his father also said he was not ready to retire. As Ashton put it, “he said he was still working on his own slice of the pie, and that we had to go out and make our own pies.”
In other words, Ashton wasn’t going to be able to “cannibalize my dad’s business.”
As he thought about this, he found himself thinking how great it would be to meld the two industry problems and create a solution. Why not a solution that would help young advisors reach established clients in the 80 percent as well as help mature advisors focus on the accounts they want and develop a perpetuation plan for the firm?
In talking about the problem with other agents, he said he learned that a lot of insurance advisors do help their clients with business succession planning, but they don’t do it for their own businesses.
Many agents don’t even understand the value of their own businesses, he said.
When asked what they were doing about this, he recalled, many advisors said “nothing.”
Out of that grew the seeds for an agency succession system that the firm now uses. Through the brokerage that he and his brothers established in 2008, the firm created a business succession plan that partners younger agents and advisors with mature advisors.
Piggyback on the 80 percent
The approach entails piggybacking on the 80 percent of business that the mature advisors can’t get around to handling anymore. It “partners-up” those agencies with younger agents who would like the opportunity to get in front of those accounts.
To date, AFG Brokerage has done 29 agency succession plans this way, Ashton said. Only one of them was a straight buyout with a check to the previous owner, who left immediately.
In most cases, the original owner stays involved for an “earn-out” period of five to 10 years or even for the original owner’s remaining lifetime. The details vary by agency, Ashton said.
During the earn-out period, the mature agent introduces the younger agent to the elder’s clients on a gradual basis. The introductions establish the partnering relationship, and let the client know that the mature agent has trust and confidence in the new partner.
It’s a win
This is a win for the client, who gets continued access to insurance and financial advice from a trusted advisor, Ashton said.
It’s also a win for the advisor, who gets access to clients they might never have the opportunity to sit in front of as well as access to a mature advisor who can relay tips on how they became successful.
Finally, it’s a win for mature advisors who want to keep working and make more money but who also want to start scaling back while assuring clients that there is a succession plan in place.
Arrangements like this are often overlooked in the industry, he said. But there is a “ton of opportunity out there.”
InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at firstname.lastname@example.org.
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