Generational Disconnect: How Veteran Advisors and Young Recruits KEEP ON TRACK

There comes a day when veteran independent advisors look away from their desks and sense a yawning gap in the middle of the office.  Across it they see a young advisor and then admit to themselves, “how fresh, energenic, bright – and clueless”

That young recruit looks back, no doubt thinking how fuddy-duddy the older advisors are with their “how-are-ya” sales demeanor.  How very analog the old school is – calling on the telephone, visiting prospects in person and carrying actual paper.

That generational divide has always been there.   But cultural differences, especially with social media, and more immediate expectations in pay and results, have deepened and widened that gulf.  Older producers are dealing with younger people they have little in common with and think of as utterly disconnected from the attitude and aptitude required for the long game of selling insurance.

Given all that, how can independent advisors find and integrate young recruits into their life insurance business and help them succeed?  Every agency will face this challenge in the future, whether it is handed off to the next generation or sold to someone else expecting that the agency will continue to grow its business.  Of course, the challenge radiates throughout the independent distribution channel, full of 50-somethings dreaming of retirement.

This means that senior practitioners need to not only attract the  young but also retain them – a not so easy task when the older and younger are decades apart and sometimes seem to speak a different language.

InsuranceNewsNet went to some veterans to find out how they handle the assimilation.  These advisor hail from independent  firms, not from career and captive agencies  which get a lot of assistance from their carriers.  Most independents are flying solo in this area even though outside resources are becoming increasingly available.

Quite a few tell of frustrating moments when they have sat at their desk, looking at a clueless young rookie, and wondered “how in the world are we going to make this work?”  The good news is, even though they’ve had their share of defeats, they’ve had successes, too.

Getting Them Interested

One problem is a lot of young people are not even looking at joining an agency, let alone selling life insurance, points out Debra L Stein owner owner of Comprehensive Financial Planning, a registered investment advisory firm in Wisconsin.  “For instance, one young university gal come in here through an internship program.  We got her licensed – and then she moved away!  She isn’t in the industry anymore.”

Stein’s own daughter, who does work in the firm, refused to make calls or sell insurance, she adds.  “A lot of younger people just don’t want to do that,” she says.

Guy Barker, founder and managing director of BTA Advisory Group, Irvine California and a 42-year member of Million Dollar Round Table (MDRT) encountered a somewhat similar experience with this grandson, who had been licensed at 18, earned a college degree, and attended a training program with a major carrier.

The grandson is now 25 and works in Baker’s firm, but “he doesn’t want to go out and have interviews with clients or sell,” Baker says. So Baker is now focusing on “teaching him from the inside” – for instance, on how to manage administration and paperwork.  Baker plans to add other aspects later on.

That’s part of the problem that advisors are having today with bringing younger people along.  “We don’t know if we will have the solidarity we’d like in our staff,” Baker says “and we can’t sit around and wait to see how it plays out.”

Of course, brief trial periods of employment are nothing new.  Young people in other eras have also tried agency work and then left in a matter of months or redirected to duties other than sales and advising.

But with fewer young people showing interest in the business today, plus high proportion of older advisors and the growing complexity of the business, advisors are saying they are feeling a lot of pressure about what to do.

The areas of frustrating are many.  Here are a few that get frequent mentions –plus some solutions that the senior advisors have implemented or are considering.

The Commission Problem.  It is extremely hard to get younger advisors to stick with an independent agency when they are working on 100 commissions, Stein says.  And many of the smaller agencies don’t have the employee benefits and other perks that larger companies offer, points out Varsha Grogan, principal of General Agents Insurance Network, a Texas brokerage general agency and an 18 year member of NAILBA (National Association of Independent Life Brokerage Agencies).

Even bringing in a young advisor on an assets-under-management compensation basis doesn’t provide much help, “because most of them do not have many assets under management to bring with them,” Stein says.

Strategy:  New recruits to the independent agency system should probably have a spouse who is earning a steady income or some other means of regular financial support, Stein concludes.  Grogan says she has seen that work. Of five younger independent agents licensed through her firm, only one stayed in the business, she explains.  “The one who stayed is a woman who also had a part-time job and a spouse with a very good job.

Stategy:  Start out the recruit on a salary, suggests Wayne D Minich, founder and president of Applied Financial Concepts, Ohio and a 37-year MDRT member.

He says he did that with a university graduate who starte3d with this firm as a full-time salaried staffer, doing back office work while getting licensed.  Then, Minich developed a bonus structure for the agent.  The bonus arrangement enable Minich to pay the agent more when times were good without being locked into a fixed amount – an essential element when times aren’t so good.   The agent income “rose and fell” with the success of the business, Minich says.

The result? That agent had originally wanted to stay in the background, but Minich began bringing him along on appointments and as he learned more, he built up an expertise.  He stayed with the firm for five years, leaving only when it became clear that he might be the agency successor.   “That agent is still in the business after 17 years, and he is also a member of MDRT,” Minich adds.

The approach worked so well that Minich also started his own sons on a salary plus bonus.  “For us, this has been a very good model.”

Slow Start to Sales.  Another problem is that the time-lag between joining the agency and bringing in commission-generating business discourages young agents from sticking with it.

Grogan of Texas has seen that happen.  In her own firm, she says she has brought younger people in but they mostly do marketing or running quotes.  “Even though they are licensed, few become full-fledged agents.  I think part of the reason is they see no direct reward from being an independent agent, due to the time it takes for agents to have results.”  She see the same frustration in agent she works with as a brokerage agent.

Strategy:  Educate the recruit, suggests Grogan.  That is what she does with the young advisors she has worked with as a brokerage general agent.

“My theory is that they need to be confident in their own knowledge before they can start to  see results,” Grogan says.  So she works with them, teaches them why they should do things  she suggests – for instances, ask health questions, find out the client’s earnings, quote appropriate rates (rather than automatically quoting the cheapest rate), find the product that fits the need, etc.

If they don’t learn what they should do and why, she cautions, customers will probably end up with the wrong products and not receive the service promised. “Word will get around , and that will drive other customers away.”

The education approach can be time consuming and it doesn’t always work.  For instance, one young agent who signed up with Grogan after a stint at a captive agency left a couple later.  “She went back because she wanted the structure and support she used to have,” Grogan recalls.

Then again, she adds, the agent she mentioned earlier – the woman with the part-time job and employed husband – has become a successful producer in the independent agency system.  So sometimes this of education does work.

“You have to refine your process so you can find the person with the most promise, and then take the leap”, she suggests.  “Make it an individual process not a cookie-cutter.”  If it doesn’t work out, move on.

Lack of Experience.  Today’s life insurance business has so much complexity, compliance, regulation, product change and other details, that lack of experience definitely makes things difficult for young advisors, says Adam Sherman, CDO of Firstrust Financial Resources, Philadelphia, and a member of National Association of Insurance and Financial Advisors (NAIFA) for more than 25 years.

“A 45 year old client is not going to take financial advice from a 25 year old” he says. “And no one is going to take advice by texting and email!”

He feels so strongly about this that he says lack of experience is ‘the biggest problem that young people face when they join an independent firm.”  A related problem is that some young advisors also have a “lack of people skills,” he says.

Strategy:  Mentor the young agent for 24 to 36 months, Sherman suggests.  Do client reviews together, case design work, marketing and related things.  It will be a unique opportunity for the junior  to learn the business and ot gain that much-needed experience.

Mentoring is “a huge commitment”, he concedes.  But since independent advisors don’t have the same level of support that career shops have, they may have to “do it all” or risk losing their young recruit.

As for the people skills problem, Sherman believes a lot of that will be taken care of by the maturation process.  “Heck, I don’t know how good I was in this area when I was in my 20’s.

Strategy:  Phase younger people into the firm’s various business activities gradually, suggest Baker, the California agent.  That is what he is doing with his grandson, as described earlier.  But also build up a team of advisors who specialize in one area or another for the practice, whether the areas focus on business succession, estate planning, retirement planning or some other.

The business model for financial advisors is changing, Baker explains.  For instance, in 1970, an advisor could work as a life insurance agent, period.  But today’s advisors work not only with life insurance but also with disability, long-term care insurance, annuities, investments, managed money and more.  They are not selling products so much as selling services, he says, and they are dealing with greater amounts of money at risk – sometimes 50 million vs. maybe 2 million max in 1970.

“It’s too much to expect a young person to learn all of those skills in a short time frame” he says.  The phase-in approach allows enough time, and the specialists on staff enable the firm to respond to the complex needs of the client.

Strategy:  Try handing off some existing clients to the younger agent early on, suggests Juli McNeeley, vice president of McNeely Financial Services in Wisconsin, and a member of the NAIFA board of trustees.

McNeely did that with one younger advisor.  The recruit started with two years’ experience at a career shop and had some  cases it was painful to give them up”, she recalls.  “But I could expect her to come here and start selling with not salary.”

The outcome?  Turning over those clients helped the younger agent “get going in our independent firm,” McNeely says.   “At some point, there has to be give and take.  It’s a tough industry to come into, so you need to give them something that will help build their confidence.

Lack of Sales Know-How.   When McNeely herself was a young agent starting out, she says she lacked sales skills as well as industry knowledge.  Her agency principal was her father, and he was “old school and tradition” about things.  “I was not allowed to provide input or make decisions,”  she recalls of her early days.  However, he did coach her and support her desire for training and resources.  He also took her out on calls, discussed case with wither and provided other hands-on training.

But there was a lot of stress, since she had little formal training other than pre-licensing courses.

Strategy:  One of the things that helped was attending the Life Underwriter Training Council Fellow (LUTCF) program.  The sales training it provided was “an incredibly good base for me,” McNeely says.  That was important because, as she puts it, “my father had been in the business for 30 years, so for him, selling was like tying his shoes.  But at LUTCF, I was with other who were in the same boat, so I didn’t feel alone.”

The impact was life-change.  As McNeely puts it, her father began to see that she was growing and, although she did things differently than he did, she was gaining expertise.  In time, she recalls, “My father began to see that I was bringing a different perspective to the table,” to the point that the two began to work with “a blended approach, using our differences in style to our advantage.”

Training was so instrumental in her ability to succeed in the business that McNeely has since added the CFP and CLU designations to her profile and is now working on her ChFC.

The technology divide.  So much has been said and written about how young people outclass their elders in the technology department that the topic barely merits repeating here.  But it is worth noting that most veteran advisors have experienced the technology divide first hand.  Some even call it the modern-day version of the generation gap, a vintage term for the cultural, informational and lifestyle gulf that can make it difficult for elders and the young to get along.

Stategy: Take a lemons-to-lemonade approach to dealing with recruits who know far more than the senior advisor does about computers, social media, texting databases and the like, say several advisors.  That is, instead of limiting talk of technology only to what already exists at the firm, allow and encourage the younger advisors to take over various technology functions.

“I find the younger people to be more savvy and sophisticated about technology than I am,” says Sherman of Firstrust, who has done exactly that.  “They can teach me about databases, social networking and the other things.”

Minich of Applied Financial says the younger advisors “have been tremendously helpful” with the technology and they have helped the agency grow its database and computer systems, for instance.  “in addition, their influence has helped me grow, phenomenally, even from five years ago.”

Even McNeely’s father came around.  As she tells it, “he had initially resisted my request to spend $6,000 on a new server that had greater capacity, to set up a VPN network that would allow access from anywhere, and to take the agency paperless.  It just wasn’t his vision.”   But in time, he began to trust her and he did allow the changes while he was still active in the agency.

The result:  The technology improvements help the firm grow, she says, “and now we are paperless and can see our documents from wherever we are.”

“I was the next generation, the future,” McNeely says of the transition.

Universal Theme

Dexter S Umekubo, senior managing partner with Producers XL in Kansas and the 2012 chairman of NAILBA, see a universal theme in how successful producers are dealing with the young advisors they bring on board.  Even though may recruits are members of the family, often adult children, their elders are not “giving” the business to the next generation.

Instead, he says, they are “giving them a chance to succeed on their own.”

In many respects, he adds, that “is not much different than when I was a young person working at my father’s liquor store during the summer sweeping the floor, making sure the coolers were full of product and that the shelves were stocked with merchandise.”

Going forward, Umekubo says, “It is incumbent on the industry to plan for the future by mentoring and encouraging our successors, and provding the tools and resources they need to continue to be successful.”

By Linda Koko for September 2012 issue of InsuranceNewsNet Magazine.  Linda Koko, MBA is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning.

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