Reading Time: 5 minutesDo you have the right IMO partner? How is industry consolidation of IMOs affecting your business? Here’s the story of what happened to me at a growing IMO when it was acquired, how it drives things now, and what you should know for your practice.
Is the consolidation of insurance marketing organizations (IMOs) by huge corporate groups making the business of independent agents easier? Or is it doing something else?
That is an important question with the Department of Labor introducing a new fiduciary rule that aims directly at independent agents, fixed index annuities, and their role in providing for a secure retirement.
I’ll share my story, and hopefully that can help you form your own opinion. Every independent financial professional deserves to see all perspectives so that they can make well-informed choices for their business.
In 2017, 350 IMOs were operating as distributors of fixed index annuity products, according to a BenefitsPro interview, but that number has gone down drastically. Huge corporate conglomerates have acquired dozens of small-to-mid-sized shops regularly each year since then.
Now, don’t get me wrong. In our business, we inevitably have both positive and negative aspects. On the positive side, a consolidating industry brings some advantages: more compensation, more firm resources and infrastructure, and more market influence on product design.
But it also brings a negative side, including less competition and ever-shrinking options for brokerage partners. For advisors, it means less choice, less independence, and in some cases, fewer people looking out for them in their business.
I should know. I saw this first-hand at a growing IMO that was acquired when I was starting my financial services career.
I’m just as supportive of free, efficient markets and ethical business practices as anyone else. But in that experience, we reached a tipping point where people were putting personal gain over their advisor relationships and the well-being of their clients.
And would you know it, my story here is actually one reason why we started Safe Money as a place that will always put advisors and clients first.
In March of 2001, I joined an upcoming-and-coming IMO with a young, growing family and high hopes.
Our office was beaming with energy and ambition. Fresh out of the gate, I was armed with little more than a phone, a computer, and a list of numbers. We didn’t really understand what annuities were, and I had almost no idea what I was talking about, but it didn’t matter.
I was told to “smile, dial, and say ‘such and such.’” Made sense at the time… Annuities were super hot, and every agent needed to sell them.
A few years and thousands of phone calls later, I became the top internal wholesaler in that office.
My relationships with hundreds of advisors were strong. Some budded into friendships that would last for years. They counted on me. Their trust and confidence were inspiring, things that I didn’t take lightly.
Because of my performance, management wanted to promote me to vice president, which was beyond exciting. But little did I know what was waiting on the other side.
Management sat me down, thanked me for my work, and told me how much they appreciated that I had built and sustained such a large book of business. I was their top dog.
However, as a vice president they expected me to push only one carrier and all cases that my advisors brought to me towards their complex products. Talk about a huge conflict of interest…
They would also lower my take-home comp on our override, which hurt my growing family. Why? Because they wanted to give more money away to advisors so that they would write business with their pet carrier.
My sense of ethics and integrity were roaring. We were an “independent” shop. If our strength was the ability to explore all the different carriers and find the best product for each client’s situation, then how would pigeonholing everyone into the same products serve them well?
If there is one lesson to take away from this story, it’s this. Beware of hidden agendas and possible conflicts of interest with your IMO, especially in this landscape of changing regulations, consolidation, and shrinking competition.
When your corporate model is driven by certain sales volume goals with a carrier, you give away much (or all) of your override to induce advisors to work with you. Once you reach those goals, you get big bonus money. The override money given away doesn’t matter as much, then.
The problem is the clients are pushed into products and carriers that aren’t a good fit for them. Then it backfires, and the advisor’s reputation takes a hit when that product doesn’t work as the advisor was told. I’ve seen it happen.
So, keep this in mind. You may see that some IMOs have this conflict in the products that they recommend. This isn’t to say that this applies to all IMOs, but it does happen enough where agents need to be aware and keep a watchful eye out. It will affect their business. On the other hand, brokerages that don’t depend as much on these sales volume goals for their business may be more ‘conflict free’ in their recommendations.
Back to the story. At that moment, I thought about the hundreds of advisors, thousands of clients, and tens of millions in retirement savings in annuities that I’d been involved with.
My family’s well-being, reputation, friendships, and personal ethics on the table. Everything was at stake. Talk about having the rug pulled out from under you…
Ultimately, I left that job in due time, as betrayal of my family, friends, and principles wasn’t an option.
Together with friends from that IMO, we started our own IMO, Safe Money. We built our business on integrity, ethics, and well-being of advisors and clients. Seventeen years later, we have grown into a mid-sized IMO serving advisor-partners across the country.
So, what should you know about the IMO space? There are many IMOs to choose from: some great, some perhaps not so much, and some that land somewhere in the middle. Each has their own business model and sales agenda.
Be wary of unscrupulous IMOs that offer overrides from insurance companies to recruit advisors, potentially putting profit over client well-being.
Here’s a hypothetical scenario to illustrate. When an IMO has recruited an army of advisors and proven they can move the sales volume, they can go to an insurance company with a product design. This product will look great on the outside but not be so great for the client once you really start breaking it down.
Some IMOs may develop products that benefit themselves and the backing insurance company more than the client. The only way you can tell is by reading a specimen contract of the product and knowing what you are looking for.
Once the IMO has a large distribution footprint, they are getting closer to their goal of a big exit (or another outcome). Many advisors believe what the IMO reps say and may even take them at their word. But ultimately the product doesn’t do as promised, and the client suffers. Advisors should be aware of these dynamics and not blindly trust any promises. Nothing beats our own due diligence.
The IMO top officers in this hypothetical scenario was planning for a lucrative exit. They didn’t think of the people (advisors and clients) they would hurt, because it wasn’t a real priority for them. They were focused on the exit — or whatever their ultimate outcome — and the journey to get there.
I’m not attempting to recruit you and everyone else to my IMO. I just want you to understand part of the complexities of the IMO space and how they can impact you, your business, and your clients.
We are in the business of promises and relationships. Our clients and our business deserve our best. That includes you having brokerage partners that genuinely support you, look out for you, and have your back.
Don’t be afraid to do due diligence on your IMO and their agendas before you sign on the dotted line. It could make all the difference for you, both now and in the future.
Side Note: Want to see how a working relationship with Safe Money can help you protect your business and increase your production? For a small indicator of what is possible in your business, check out this 48-question guide to win more clients and get your own complimentary guide copy.