More independent insurance agents will be retiring than starting careers this year. It’s the same story from last year, and previous years before that. The industry’s sales force is dwindling and is at risk of becoming detached from its consumer base. Young professionals opting for other careers hold the median age of the country’s labor force at 37-years-old. Meanwhile, the median age of insurance producers hovers at 57.
In the past, the independent life industry has gleaned a fresh flow of agents from old-line mutual, career agencies like Guardian, New York Life, Northwestern Mutual and other companies who invest and train young financial professionals that often go independent later in their careers. However, there are fewer of these training powerhouses training “newbies” these days.
Northwestern Mutual is one that has stayed the course. The company has had a strong internship and full-time career track program for 18 years as a way to recruit young talent from college campuses. The over 150-year-old insurer recently started allocating sponsorship dollars toward the NCAA to advance its effort to attract top talent from the 2,000 to 3,000 new hires it brings in each year. Their new Life After Athletics program reaches out to athletes who have the potential to leverage their discipline and competitiveness in a sales role.
This kind of attention to the issue is critical, but it’s unlikely that it can hold pace with demand. The industry has lost over 15,000 agents in the last seven years and few independent agents are joining the sales force annually. The demand is intensely greater than the supply. Fewer than 20% of new agents are still on the job after four years. Some estimates report there’s as much as a 50% turnover in the next 15 years due to producers retiring.
Although the entire insurance industry faces this difficult challenge, some in the industry are simply not addressing this growing issue. Several industry executives declined the opportunity to comment on the issue when NAFA’s Annuity Outlook Magazine requested an interview.
How Can the Young Survive?
Practical matters make an independent career track difficult for a bucking young professional. While the income potential exists, the starting pay isn’t always great. Seventy percent of agents earn less than $35,000 in their second year, according to LIMRA.
A career track that is entirely commissioned-based from the get-go offers very little training on how to get started. It makes it difficult for new agents to buy books of business, and exasperated by the fact that it’s not easy for someone in their 20s or early 30s to prospect to baby boomer clients about retirement matters. It’s no wonder young agents are trickling in slower than a leaky faucet.
Gen Xers and the Millennial Generation are worried how they will get started in the business, said Dr. Rob Hoyt, department head and professor at the University of Georgia’s Terry College of Business – the country’s top ranked program for risk management and insurance as reported by U.S. News and World Report. Hoyt’s department graduates about 150 students each year, making them the largest insurance-focused academic program in the nation.
Hoyt says his department educates many students who are self-starters and see themselves as wanting a career in sales, but the sink-or-swim philosophy the life insurance industry offers doesn’t fit well with students from the program. “The right graduates are certainly willing to take risks, but they want to see a partnership philosophy from [someone they work with],” he said. “All commissions and no training will not attract the high-performing students from our program.”
Figures from LIMRA suggest that if these young agents jump in and survive the grueling first years, there’s a good chance they’ll be earning $113,000 to $134,000 after their fifth year.
Finding a Solution
There are a host of reasons for why younger professionals have not joined the industry. Most of them come down to communication, says Suly Salazar-Layton, Director of Practice Management for Genworth Financial. “A great number of insurance professionals end up in the industry as opposed to choosing to enter the industry.”
Insurance careers, especially sales careers, have not been presented to students as a positive career opportunity, Salazar-Layton explains. “I can tell you from personal experience that while presenting during career days or interviewing college bound applicants, I have never heard a young adult say they want to become an insurance professional.”
While the younger generation is ripe, women also represent a significant talent opportunity, as they are known for building strong relationships. Women have also left corporate jobs to stay home with family, but when ready for a new challenge, they represent a great talent pool.
Opinions around careers can form early and insurance has often been cast in a negative light thanks to the hard sales approach, Salazar-Layton continues. “The reality though is that insurance careers are all about relationships. They offer a great opportunity to build a dynamic business with tons of growth potential. A career as an agent actually fits very well with many of the things that are important to younger adults – helping others, unlimited opportunity, communication, independence and creative thinking. If you look at the corporate world of today – reorgs, lack of full pensions or 401(k)s, the career as an independent agent can and should be a powerful motivator.”
Maribeth Kuzmeski also sees a lot of opportunity for both hopeful young agents and the insurance industry. She is President of Red Zone Marketing and has been working with financial advisors for over 15 years. She is also currently in a business Ph.D program through Oklahoma State University where she is researching the theoretical and practical implications of recruiting financial salespeople through pipelines, such as colleges and universities that have sales programs. College sales programs are a perfect place for where the insurance industry could invest in, train within, and recruit from similar to what Northwestern Mutual is doing with the NCAA.
There are currently over 100 universities that have sales specific programs, said Kuzmeski. “That isn’t a lot, but for companies like State Farm, 3M and others who are contributing funding and curriculum insight, there is a wonderfully qualified pool of applicants to recruit and fill their job openings.”
Find Self-Selected Students
Because training is expensive, Kuzmeski points out that hiring people who are already interested in the industry and partly trained allows those training dollars to reap greater rewards with competent and committed sales professionals. If finding the right person for the job is key, then students who select themselves as wanting a career in sales – and financial sales at that – opens the door to success for everyone.
Training
Training is an area that the insurance industry has continually lagged behind in over the last few decades, notes James Wong, President of Partners Advantage Insurance Services, LLC. In the past, insurance carriers have provided the training and coaching, but not anymore. Wong’s insurance marketing organization has invested in creating a broad-based online training program that their partner agencies can use to learn sales tactics, cross-selling opportunities, product insights, and suitability requirements.
“We have learned that advisors want leads. But we have also learned that once they are in front of a prospect, they are not equipped to handle the situation,” Wong said. Providing their agencies with this powerful training mechanism and starting their own internship program for college seniors are ways Partners Advantage is doing their part to welcome and equip young, new, hopeful insurance producers.
Sharing Books of Business and Team Sales
Another bright spot within the industry is the growing number of producers working together with agents building smaller agencies with down lines. Wong pointed out that agencies with family dynamics have especially found success working as a team and playing off generational strengths. “A team sales approach allows the selling to be done by the father and the illustrations and presentation done by the son . . . The conversion rate is much better with this approach,” he said.
Wong admits that integrated sales teams are more difficult to find outside the family dynamic because it all hinges on finding the right person. “Agencies need to bring on someone who grasps the potential of what they are doing in order to effectively take over,” he said.
A recent Genworth Practice Management Insights Study reports that only 25% of financial professionals have a continuity or exit plan. This statistic shows that these businesses may be at risk and also highlights the potential opportunity for younger professionals.
Mentoring
Kuzmeski believes the insurance agency is set up to help young producers find success, but the industry must be strategic about it. Internship and mentorship programs are nearly as time consuming and expensive as training, but these “ensemble arrangements” between young, new agents and older, seasoned producers could very well be the perfect dance the industry needs to sustain and grow. The financial services industry currently uses this model, as exemplified by wirehouses such as Morgan Stanley and Merrill Lynch.
Natalie Dennis, 28, has utilized seasoned mentors to help her build her life insurance business over the last four years. Recently she has partnered up with a 79-year-old independent agent she met at a business meeting. Dennis says it’s a mutual relationship that provides her with effective advice and meaningful introductions to assist her in growing her book of business. She notes that the relationship has also helped her improve her knowledge of the newest products, trainings, and technologies.
John Bracker, 33, entered the financial industry right away after graduating with a degree in economics. He worked with MetLife until three years ago when he went out on his own as an independent financial advisor.
Bracker said having a seasoned mentor and lots of structure set his career on a successful track. “I’ll have to say, it was military-style strict,” he said. “Every Monday we had a meeting to talk about our week. We had to make our 150 to 200 phone calls. It was so structured my whole week was planned out every 15 minutes.”
He is one of only a few advisors his age he’s aware of who has gone independent. Bracker says the lack of mentoring and training is one of the biggest issues facing the industry. “Agencies do a bad job of teaming up the right advisors [with the right mentors] . . . It’s an epidemic,” he said. “Part of the issue is that the older advisors don’t want to give up anything.” One of Bracker’s colleagues who started in the same, structured office has found similar success while countless others are no longer in the industry.
No Secret Recipe
Overall, it appears the industry needs to tackle issues surrounding the aging salesforce by creating a more welcoming environment for younger generations to test the waters and find success. Reaching out with more strategic communication to college sales training programs can shine a spotlight on the incredible opportunity an independent life insurance business presents. Better avenues for training will help all agents grow. Understanding streamlined ways to mentor and share books of business will assist both sides of those partnerships. Facing the facts is the first step.
The challenge is that the demand requires thousands of new young professionals to follow in the footsteps of seasoned agents who are nearing retirement. If the challenge isn’t met, the industry may lose the ability to serve consumers and address their insurance needs. There are a lot of thoughts and no secret formula to address the issue. But one thing is clear; everyone must continue searching for answers with more urgency.
“We believe we must do our part to turn people on to this industry,” said Wong. “But, we need help in that regard from all our friendly competitors.”
NAIFA Young Advisors Team
Among the industry efforts to encourage and equip young insurance professionals is the National Association of Insurance and Financial Advisor’s (NAIFA) Young Advisors Team, also known as YAT. The program was created in 2004 and helps to ensure that young and new advisors receive the vital tools, resources and networks necessary to succeed in the financial services industry.
There are 7,300 (under 40-years-old) YAT professionals of the more than 40,000 NAIFA members nationwide. Like other industry influences, NAIFA believes providing high quality education and training resources for young advisors is among the best ways to attract them. NAIFA offers various resources, including conferences, workshops, monthly webinars, online video training and tele-coaching programs targeted to young advisors to help them hone their practice development skills and industry knowledge. YAT provides peer networking and leadership opportunities for young advisors as well.
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