Mike Vietri is Chief Distribution Officer for AmeriLife, a national leader in distributing and marketing insurance and financial solutions.
The consolidation of wealth distribution companies and brokerages has been a hot topic in our industry as we continue to ride the turbulent wave of this uncertain economy. Organizations nationwide are constantly looking for new ways to stay competitive and remain profitable.
With challenges like inflation at a 40-year high, fluctuating interest rates and continued quantitative tightening, the mergers and acquisitions scene has cooled over the past year or so.
In fact, despite a record-breaking 2021, M&A activity within the larger insurance industry saw a dramatic decline in the second half of 2022—a 69% deal value decrease from the year before, to be precise. However, brokerage deals are expected to be the first sector to recover, and overall M&A activity may begin to pick up in late 2023 or 2024, according to Deloitte’s recent M&A Outlook.
Here at AmeriLife, we’ve acquired over 70 affiliates in the last four years alone. Rather than viewing consolidation as something to fear, I think industry leaders and the wealth distribution industry at large should view it as a positive development with the potential to spur change and drive profitability.
Why Companies Consolidate
As M&A activity recovers, further consolidation breeds opportunity—though there are many myths and misconceptions those within the M&A space often face. A closer look reveals that industry consolidations can create powerful partnerships that provide several notable, positive impacts.
Bringing together the expertise of multiple firms has the potential to create a stronger, more diverse team of professionals. This can help nurture a holistic approach to services that spans the complete needs of customers, while scaling best practices.
From access to larger markets and new technologies to increased efficiency, enhanced reporting, streamlined cash management and cost savings, the list of benefits goes on. By combining resources, smaller companies can reduce overhead costs, such as marketing and advertising expenses, and optimize operations within a larger organization.
In our industry, consolidation can create larger teams working together with a greater market presence. For us, consolidation creates future-proof partnerships that can drive growth and success.
Of course, consolidation comes with its challenges, like the potential for redundancies that companies can quickly integrate and more complacency that companies avoid by keeping on top of current trends and technology. Consolidation is a significant investment, and in an uncertain economy, that can be a gamble.
Serving A More Holistic Purpose
Many people consider this to be a difficult time for M&A, but I’ve found the key is to focus on creating partnerships that are mutually beneficial and will help everyone reach their goals. This means focusing on the needs of both firms and understanding how they can work together.
Always look for ways to leverage strengths and weaknesses. By understanding each organization’s unique capabilities, you can create a more balanced approach to your services.
Create a shared vision and set of values to help ensure that everyone is working together toward the same things. Strive to build a culture of collaboration and communication to help create an environment where everyone can work together effectively and efficiently.
For example, we start each year with our national kickoff conference, meant to inspire and energize our entire distribution. Throughout the year, we produce a monthly magazine aimed at informing and inspiring our partners across our company, ensuring we stay aligned on our vision and goals. And we offer enterprise campaigns and incentive programs to get everyone involved.
Everyone can take advantage of each other’s strengths to create a stronger, more holistic team, which, in turn, can better serve the industry’s comprehensive needs.
Breaking Down The Truth About Consolidation
While some may regard consolidation as a complicated or overwhelming process, it’s important to break it down to a less intimidating level and recognize the simple facts. Let’s debunk three common myths to determine what’s real and what’s just plain noise.
1. Short-Term Versus Long-Term
Fiction: Private equity is historically short-sighted and doesn’t consider the long-term needs of our industry and its professionals.
Fact: PE capital allows distribution and marketing organizations to accelerate investments in resources, technology, platforms, back-office services and even downline acquisitions to enhance sales opportunities and help agents and advisors grow faster, allowing them to stay ahead of the competition.
2. Agency Versus Support
Fiction: Consolidation is about takeover and taking away the individual “agency” from entrepreneurs who have built their business.
Fact: Partnerships don’t mean takeovers; it’s a support system. A good partner isn’t looking to fold others into themselves, but rather to elevate and empower their partners and their business success. Sales growth can lead to business growth, which itself can open new opportunities.
For example, with my company’s acquisitions, we’re keen to support back-office integration and share business operational services. Providing these tools and resources allows our affiliates to instead focus on their unique abilities to distribute and sell.
Consolidation can also aid in succession planning for when entrepreneurs are ready to step back, aside or assume a new or different role.
3. Distraction Versus Future-Proofing
Fiction: Product diversification will only serve to distract producers and their uplines from focusing on what made them successful in the first place.
Fact: In today’s world, a holistic approach is essential to delivering on evolving consumer needs. The key is ensuring you have the infrastructure and resources to properly invest in diversification.
From my vantage point, the ability to ensure the client doesn’t outgrow the agent and the agent doesn’t outgrow us is the key. As agents and advisors take advantage of the opportunity to diversify their product portfolio, their business not only grows, it starts to future-proof itself from the potential impact of changes within the marketplace.
Remember, “holistic” isn’t just a buzzword, but a real business strategy for growing and accelerating your organization to reach a greater goal together.
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