Advising’s talent acquisition problem

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When I speak at industry events across the country the most common question I receive takes some form of, “Why are there no young people in the insurance industry?”

Frankly, for a long time that question didn’t bother me. After all, who wouldn’t want to survey a competitive landscape with fewer competitors?

As I grew within the industry, I began to realize that our focus had nothing to do with competitors and everything to do with the impact of a multitude of industries driving off the proverbial cliff. Stated another way, the exponential growth of U.S. healthcare and health insurance is not sustainable. Therefore, it makes reasonable sense that those who will be spending the most time dealing with the impending disaster would be those most invested in fixing the problem.

So where are the legions of young professionals ready to tackle America’s next big challenge?

I work with my father, who is the second generation to lead our company. At 56 years old, he one of the most progressive and innovative advisers I know. Our industry’s issue is less about age and more about a status quo that has historically generated significant income without requiring much innovation.

The average age of an insurance industry professional is 54 years old. Many of these professionals were 20 and 30 years into very lucrative careers when the entire game changed with the passage of the Affordable Care Act.

Since that time, these professionals have been asked to do more while earning less. The majority of these professionals and the firms they represent spend their time with industry peers tossing around the phrases “commission compression” and “being resourced to death,” rather than focusing on the opportunity to not only solve a major crisis but to grow their business at the same time.

The wrong focus
Faced with an uncertain future and an environment that increasingly requires rapid adaptation, these professionals with 5-10 years remaining on their career path are looking to sell their businesses while they still can. Right now, these transactions are typically closing for six-to-eight times EBITDA, which is great for the exiting insurance professional — but not for their staff who may have viewed the insurance industry as a long-term career.

Also see:2018 Rising Stars in Advising.”

Large private and public firms are more than happy to purchase small- and mid-sized firms, since these transactions produce growth for shareholders, increase bonuses and overrides, and occasionally lead to the discovery of young talent. The problem is that when you purchase a firm for six-to-eight times EBITDA and trade at 24-44 times EBITDA, these transactions prove far more lucrative than investing years in developing a pipeline of young professionals.

Many people would argue that young professionals are too concerned with instant gratification to put in the time and effort required to stick out a career in the insurance industry. I would argue that large firms, that control the majority of the business, are equally guilty of being too concerned with instant gratification to invest the time in developing young talented professionals.

As a young professional, I believe there has never been a better time to enter the insurance industry. When both the healthcare delivery and health insurance industries business models are changing and your largest competitors are too entrenched to evolve or change direction, the opportunities are endless if you know where to look.

Bob Gearhart will expand on this topic during a panel session at EBA’s Workplace Benefits Renaissance, “Adviser Transformation: The Next Generation,” Wednesday, Feb. 28, in Atlantic City.

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