The offers are ready to present, and Jim Schubert’s plan is to deliver them to the two prospective new members of his producer force as soon as he gets off the phone.
For the moment, however, Schubert, president of Southern States Insurance, an independent agency with offices in Georgia and Florida, is animatedly discussing how his courtship of the two potential new hires underscores the plight firms like his, and the financial and insurance segments as a whole, face as a result of the aging of the advisor and agent workforce, and the dearth of younger producers ready to step in to replace them.
Particularly revealing are the similarities between the two producers Schubert is seeking to hire. Both are young, successful insurance agents. Yet as well as they are doing at their respective firms, both have told Schubert they are clamoring to leave for one reason: “The owner is elderly and we have no idea what his plan is for keeping the agency viable when he retires.” What’s more, once they resolved to look for another firm, both were recruited via social media, with LinkedIn providing the conduit for initial contact between them and Schubert.
The reality in financial and insurance circles today is that while demand for advisory services is rising, driven largely by baby boomers grappling with retirement and pre-retirement issues, the ranks of advisors are shrinking, as advisors themselves retire in increasing numbers without younger advisors filling their shoes.
“With 50 percent or more of successful advisors across nearly all channels over age 50, the industry needs to find ways to bring more young people into the industry,” asserts Eric Sondergeld, corporate vice president and director, strategic initiatives, at LIMRA, the life insurance industry trade group.
While progressive firms such as Schubert’s actively seek out young advisors and agents, and embrace tools such as social media to attract them, the many that aren’t heeding the warning bells about aging and attrition within the advisory ranks risk watching their young talent walk and their biggest assets — people and relationships — evaporate.
Those warming bells are growing louder largely as a result of sobering data documenting the extent of contraction within the advisory ranks, from insurance to financial services, along with projections that the attrition will continue. Finance and life insurance groups are responding with initiatives such as the LIFE Foundation’s LIFE Lessons Scholarship program, which is designed to draw college students to the life insurance business, and TD Ameritrade Institutional’s recently unveiled scholarship program, which aims to attract college students to the investment advisory profession.
Need and opportunity
The growth rate — that is, the public’s need — for financial advisors in the decade ending 2020 is projected to be 32 percent, compared with 14 percent for all occupations, according to TD Ameritrade, citing figures from the latest Occupational Outlook Handbook from the U.S. Bureau of Labor Statistics. That translates to 66,000 new financial advisor jobs.
While job opportunities abound in the advisory field, the insurance and finance segments are struggling to attract young salespeople to industries that some view in an unflattering light. Lingering memories of insurance companies and investment banks performing or behaving badly during the recent financial crisis only reinforce that negative perception.
“I think there’s a negative stigma [attached to the insurance business] because there is a lack of understanding of the business, that it’s just about selling products, when what it’s really about is being a trusted advisor for your clients,” observes Brian McNeely, senior vice president and partner at Reagan Consulting, an insurance-focused consulting firm based in Atlanta. “That’s a tough one to overcome.”
In the years ahead, an advisory firm’s survival may well ride on its ability to recruit and retain young producers to replace retiring advisors, McNeely says. “Ultimately, the ability to remain profitable hangs in the balance. People (advisors and producers) are the business. People are the industry. Without them, the assets are gone.”
Trouble is, the people who run insurance and advisory firms aren’t necessarily dedicating enough time, energy and resources to creating and retaining their most vital assets. “I think they just don’t have the time, or aren’t willing to take the time it takes, to bring in younger people,” observes Schubert.
Nor do younger people appear to be flocking to the industry, which, according to McNeely, “is a little bit of a mystery,” given the opportunities it offers agents/producers. “I think it’s one of the world’s greatest-kept secrets,” he says. “It’s a phenomenal business opportunity. It gives a person a lot of flexibility with their lifestyle. It gives them a chance to partner with and help people, and it gives them a chance to create wealth for their clients and themselves.”
Filling the void
Educating the public about that opportunity — and turning the insurance and finance professions into beacons that attract talented young producers — will be key to reversing the exodus from the advisory ranks, McNeely asserts. “The [insurance] industry could be doing a better job articulating what the opportunity is. It’s telling the story about what working in the [insurance] industry is really like and getting it out there” through coordinated campaigns like those undertaken by TD Ameritrade and the LIFE Foundation.
But creating a sustained influx of young production talent requires more than industry-wide public education and scholarship programs. Industry observers agree that individual insurance carriers and agencies/advisory firms themselves, along with the people who lead them, are most critical to stemming the tide, since they’re the ones in charge of recruitment and retention efforts.
One key to both recruiting and retaining young producers at the firm level, says Susan S. Toussaint, co-founder and partner at Oceanus Partners, a Lutz, Fla.-based, insurance-focused consultancy, is to build the firm’s value proposition around a specialized area of the insurance or finance business, so the why behind the business is clearer to new recruits. “The value proposition really has to speak to why the firm does what it does, how they do what they do and the impact of what they do. They want to know who they are helping and why.”
On the recruitment side, casting a broader net is key to finding quality young salespeople, according to McNeely, pointing to Reagan Consulting’s recently updated Young Producers Study, which concludes that “college recruiting does work, but many agencies have found better success in hiring young men and women that have several years of work experience. These hires may be a little more expensive but they typically have greater maturity and bring real-world experience.”
“It’s about finding good consultative salespeople,” McNeely elaborates. “You can always teach them the [insurance] business.”
To attract young talent, “fish in their pond” — use social media sites as recruiting tools, as Schubert is doing with LinkedIn and CraigsList. “I have gotten a lot more conservations going that way than I ever thought I would,” he says. Fishing might also entail approaching local universities and asking them to allow you to talk with students about opportunities in the advisory/agent space, and by offering internships to college students.
Use youth to attract youth, suggests Schubert, 35. Young agents can be invaluable in helping attract young recruits, such as by involving them in the interview process. There’s comfort knowing “there are others like me here,” he says.
To strengthen retention, the finance and insurance sectors need to improve advisor/producer training programs. Today, according to Cerulli, training efforts on the whole are falling short. “Despite heavy investment, firms see little yield; an estimated 20 percent to 30 percent of trainees survive to make it as productive advisors. Given current hiring rates and anticipated retirements, conversion rates would need to move higher than 67 percent to break even with attrition.”
Strengthening training programs means “coaching [trainees] to a well-defined model,” and making sure the model is supported with adequate resources, maintains Toussaint. That contention is supported by Reagan’s Young Producer Study, where respondents identified high-quality support staff and value-added services at the firm level as among the factors most instrumental to their success.
Keeping lines of communication open between trainees and trainers, and making the evaluation and training process as transparent as possible, are key to retaining young producers, says Schubert. “It’s important during onboarding to set out what they can expect, and to stick to the plan. It’s also important that they know who to talk to if something’s not going as expected.”
A strong mentoring program is also essential to successful young producer training and retention. It’s “the number-one thing firms are doing to increase the success rate of the people they are hiring,” says McNeely. The most effective mentoring programs, he adds, are those where mentoring relationships aren’t forced upon people but instead arise organically from within the culture of the organization.
Teaming is proving to be a similarly effective retention tactic, according to LIMRA’s Sondergeld. Nowadays, he says, a majority of successful advisors participate in some sort of team, often revolving around revenue sharing.
A well-structured incentive program also strengthens retention, according to Schubert. He suggests paying an equal percentage of commission on new and renewal business, and creating friendly internal competition around each.
There’s also an important role for carriers to play in the recruitment and retention efforts at the firm/agency level, asserts Schubert. “Insurance carriers have a lot of influence. They could prioritize partnering with agencies that have proactively positioned themselves to be strong in the future. That would send a strong message.”
Until firms and carriers alike show a stronger inclination to deliver and act on messages like that, the advisory ranks are likely to continue shrinking.