Agents Selling Financial Services, Three Texas Agents Discuss Success

By | June 4, 2001

During the last decade, the wall separating the worlds of banking and insurance has crashed down. Banks are buying insurance agencies. Banks are merging with insurance companies. The Independent Insurance Agents of America has even helped launch InsurBanc in three Northeastern states. This new type of federal savings bank allows agents there to market auto loans, mortgages, certificates of deposits and other financial products to their customers.

How can an agent keep up with all these changes? And more important, how can an agency stay competitive in this environment?

Agents in the trenches say flexibility and resourcefulness are key to staying competitive when the rules keep changing. With banks becoming more aggressive in the insurance market, they say agents need to fight to keep their clients by trying new strategies such as selling financial products. In the following article, three Texas agencies discuss how adding financial services to their portfolio has contributed to the strength and success of their agencies.

Bailey Insurance & Financial Services
Waco-based Bailey Insurance & Financial Services has always benefited from the broad vision of the Bailey family. Bill Bailey, who founded the agency in 1956, went on to become a key player in Independent Insurance Agents of Texas’s political action committee and eventually was elected president of the national Big “I” association. His time in Washington, when the bank lobby was pushing to expand their powers into insurance sales, made Bailey and his son, Wes, realize that the world of insurance was changing.

The large Waco agency began to look for new ways to better serve its clients. That search led them in the early 1980s into a totally new area—financial services. The Baileys hired George Kidwell, a respected local financial planner and CPA, to head and develop its new financial services division.

Kidwell says one of the division’s early challenges was to select the right broker dealer. They ultimately decided to work with Commonwealth Equity Services. “It has been instrumental to our success,” explains Kidwell. “You need a dependable, quality house that you can rely upon for timely executions of stock trades and other activities.”

Set up as a separate corporation, the financial services business is completely licensed and handles everything from stocks and bonds to business life insurance and 401K plans. No commissions or incentives are offered to Bailey insurance producers who refer clients over to the financial services area.

“The real incentive is to seal off the account from other agents’ attacks,” says Kidwell. “We all need to remember that we ultimately serve the client—we’re here to serve their needs.”

Kidwell says that providing a broad range of financial products solidifies in the public’s mind that the Waco agency has a full service to offer.

“You bring to the table more understanding and ability to lend assistance,” says Kidwell. “If you can buy a product from Agent A or Agent B, and it costs about the same price, you’re going to go with the guy who has a deeper understanding of your business. The bottom line in this business is service. If you lose the attitude of being a servant, you’re dead wrong.”

Currently, about 20 percent of the agency’s property/casualty clients do business with its financial services division. The division also works with businesses and individuals who are not yet clients of the insurance agency. The three-person financial team contributes about 25 percent of the Bailey agency’s annual revenue.

Sometimes the producer and the financial services advisor join to meet with an agency client, but more often they meet individually. At a conference to discuss renewing a commercial policy, for example, the producer will ask the client is there’s anything else he or she needs help with. The client may say, “Well, I had a question about my 401K plan…” That’s the cue for Kidwell and his people to step in.

Kidwell says the working relationship of the insurance agency and its financial services division resembles to a degree that of a good plumber and electrician. “You may not need them at the same time, but they are both integral to building a house.”

Catto & Catto
A well thought out merger in the mid-1990s allowed Catto & Catto, a San Antonio insurance agency formed in 1935, to explore new opportunities in the field of financial services and more fully develop its customer base.

It all began when Catto & Catto was considering teaming up with another independent agency. The agency principals wanted to target a firm that would strengthen their existing operation and add some new expertise. They were drawn to the partnership of John McCaleb and Jim Blakey. McCaleb had made a name for himself as a property/casualty agent, while Blakey was the benefits person.

The merger also made sense to McCaleb and Blakey. Catto & Catto Benefits Group, L.L.P., was formed in 1995, with Blakey at the helm.

Since then, financial services and employee benefits sales have grown to account for 40 percent of Catto’s total revenues. Of Catto’s 55 employees, 14 now work in the financial services/employee benefits area. The division services about 300 total commercial clients, ranging in size from small employers to a huge operation with 30,000 employees. They offer a full array of employee benefit products, retirement plans, business life, life insurance for high-worth individuals, and variable and fixed annuities.

Part of Catto’s strategy has been to tightly focus its own operations and build solid relationships within San Antonio’s professional community. The agency currently out-sources investment planning and individual health insurance, for example, and will start farming out small group health in June. Blakey explains that these types of health coverage are difficult to place and are not cost effective for the agency.

“It’s usually not a pleasant experience for us or the clients,” he says. “We’d rather have someone else make them unhappy.”

The growth of the new firm has been steady, increasing a rate of about 20 percent a year from 1996-1999, and leveling off to 8 percent in 2000. Blakey says that half of the growth has come from cross selling to Catto’s property/casualty book. The rest has been through contacts with people who were not existing agency clients.

Blakey says it makes sense that a financial services/employee benefits firm would look outside the agency for potential clients.

“Some of our best prospects wouldn’t generate a significant property/casualty account,” he explains. “Property/casualty producers look for someone with a large fleet of trucks, heavy equipment or products that are distributed. Our best prospect is someone with a large number of employees, who needs a strong benefits program to retain them, such as a high-tech firm.”

Blakey says Catto’s property/casualty producers were initially wary of handing over client information to a newcomer. “In the beginning, the producers would accompany us, at least on the initial call. We had to demonstrate our abilities. We’re way beyond that now, and we’re very pleased with the success. We think our future is bright.”

McQueary, Henry, Bowles, Troy, L.L.P
One of the most recent large Texas agencies to make inroads into the world of financial services is McQueary, Henry, Bowles, Troy, L.L.P.

Agency partner Don Bowles describes his agency’s efforts as still very embryonic. “Our agency has about 120 folks in Dallas, Fort Worth, Houston and San Antonio,” he says. “Only three of those people work full-time in the financial planning area.”

Bowles says that MHBT Financial Services, formed in 1998, provides agency clients and others assistance with 401K plans, business life insurance and estate planning, among other services. The agency also provides a full range of employee benefit products.

“We’re not trying to operate as a stock brokerage firm,” explains Bowles. “Our orientation is toward offering security-based products as part of a quality business life or individual life product.”

Bowles says his agency hired Gary Cook, a certified financial planner with more than 15 years’ experience to set up the financial firm. It shares contiguous space with the independent agency, and is located on the floor beneath the commercial insurance operation.

To get out the word about its new financial services operation, McQueary, Henry, Bowles, Troy has created seminars for some of its key clients. The multi-disciplinary programs have included both the agency’s financial services representative and other experts, such as an estate-planning lawyer. Agency clients appreciate the seminars, which cover topics such as current tax law.

The agency also lists these financial services on its web site and in agency brochures and other advertisements.

The most recent numbers show that financial products (not including any employee benefit plan revenues) now contribute about 6 percent to the agency’s overall annual sales.

Bowles says offering financial products is much more than a defensive strategy that helps guard accounts from other agents. He sees it more as an offensive strategy that puts an agency in front of many different people at a business. To sell a commercial insurance policy, an agent will be talking with one set of individuals, he notes, while to sell and service a 401K plan, the agency will likely be working with the human resources department.

“Obviously, you have to do quality work,” says Bowles. “But if you succeed in doing that, you have a higher possibility of retaining the account. You can develop strong relationships with more individuals within an organization when you offer them a broader array of products.”

Topics Texas Agencies Property Property Casualty Casualty

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Insurance Journal Magazine June 4, 2001
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