The Value Added MGA

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The Value Added MGA

• Avoiding the Commodity Trap
• Rogers Advisor Group Presentation
• Niagara on the Lake
• June 3-5th 2009
• Keith Brown CLU, CFP, ChFC.

Dealers Summit 2009
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Todays Agenda

• Dangers, Opportunities, Strengths
• Capabilities vs. Opportunities
• Commodity Trap
• Value Added
• Profitability
• Choosing the Right Partners
• The BIG Future

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MGAs are still in the Wild Wild West!

• Some are
• Mature and/or Commoditized
• New, growing and requiring further investment
• Trying to figure out the best cost structure /
  service / value added
• In a Technology nightmare in Technicolor!

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Dangers

• Not staying focused on unique ability
• Competing on price
• Undercapitalized / Profitability
• Compliance
• Technology
• Recruiting / retaining advisors
• New competitors

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Opportunities

• Develop a profitable quality business model
  that advisors and customers see value in being
  associated with, while maintaining margin
• There will be consolidation
• Help advisors grow their business / income
  without killing your margin
• Green Peas / Succession / Mentoring
• Becoming a Marketing Organization

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Strengths

• The Wild Wild West
• Wisdom
• We know the business of life insurance
  distribution better than anyone
• Final 3 feet
• We are in a position to provide leadership to
  advisors and suppliers alike
• Future focused

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Capabilities vs. Opportunities
Strategic Situation
Capability of your Organization
Opportunity
Numerical Value/ Situational Value
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Our Commodity World

• Most of our services can be purchased without the
  use of an advisor
• Term insurance, investment funds, home made
  wills, tax return software etc.
• Advisors discounting and/or rebating commissions
• Insurance calculators and online Financial
  Planning software

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Do it Yourself at Home
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McDonalds
Plastic cups fast food! (Commodities)
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Tim Hortons
Donuts, coffee, paper cups, plastic seats fast
food (goods)
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Experience Economy
Starbucks (Services)

• Starbucks (Services)

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The Experience Economy

• Caffè Artigiano The Best Coffee In My Town
  Wisdom!

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The Experience Economy
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Commodity Trap
MGAs (and advisors) get caught in this trap all
the time For MGAs Competition for new advisors,
staff, new business or perceived competitive
advantage draws us all into this trap.
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What do High-Calibre Advisors Want?
?
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What do High-Calibre Advisors Want?
?
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Answer
Predictability!
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Value Added
What do we as an organization do to add value and
avoid getting caught in the Commodity Trap?
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Differentiate Ourselves!

• Daystar isnt a product provider, it is
• Asking the right questions
• If we were meeting here on June 4th, 2012 looking
  back to today, what sort of things will have to
  change for you to be happy with your progress?
• Dangers, Opportunities, Strengths
• Challenging assumptions
• Exposing the advisors context

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Differentiate Ourselves!

• Differentiate yourself by
• Knowing the unique abilities of you and your team
• Having processes for everything
• Knowing who / what your Ideal Advisor is
• Delegating everything else

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Margins and Profitability

• Most of us need a 20 margin to cover our basic
  cost of doing business and then we may have
  something left over for profit.
• The advisor wants to go from 180 185
• How would you feel about doing business with an
  MGA that is not profitable?
• Could service interruptions be a problem for your
  business?

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Compensation Discussion

• What does your current MGA provide you for the
  170 O/R you are being paid?
• If you were to change MGAs, what are 3 things
  that you want to change most in your business?

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Of Gross Pay Out 200 contract

• 140 70 145 72.5
• 150 75 155 77.5
• 160 80 165 82.5
• 170 85 175 87.5
• 180 90 185 92.5
• 190 95 195 97.5

Which staff should I lay off so I can pay you
185?
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Advisor Pay Outs
Calculations based on 1,000 of premiums at 60
FYC.
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Profitability
The numbers, it all comes down to numbers. Only
if you let it. Lets look at the cost benefit
analysis for increasing advisor pay outs vs. MGA
profitability..
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Compensation
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Cost/Benefit Analysis
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Its only 5 and youre making lots of money

• If you want another 25 of my margin, how do I
  cut my costs by 25?
• Which of my staff dont you like this week?

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The Sacred Cow
The Sacred Cow
Service Fees
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The Right Mix
Everyone associated has to be an Advocate.
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The Effect of Bad Debts

• MGAs face tremendous risk for bad debts.
• There are rogue advisors out there.
• Have a debt with one company and MGA?
• Just switch to another one.

Why do we allow this?
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The Future MGA

• Marketing firms
• Value and future focused
• Partnerships with suppliers
• Large vs. Boutique
• Process oriented
• Long term thinkers

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Summary

• Eliminate competition by having packaged
  processes that drive solutions to your advisors.
  Do not compete on price!
• Know what your unique abilities are, do only
  those things, delegate everything else
• Maintain a network of allied professional
  advisors to support your efforts

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Advisor.ca MGA / Dealer Conference
The End Thank You!