Tom Broughton, editor
Are you really cut out to be a corporate salary monkey? Many out there have nice, tidy, lifestyle brokerages which soak up local repeat clients, liquid-gold profits and operate free from the politics of the quarterly board meeting with over anxious paymasters. Many too have money in the bank having sold their businesses at excessive multiples to the consolidator power player of the day. And many have also spotted a big fat opportunity staring them in the face to start all over again against the backdrop of the rapidly shifting insurer segment and recession. (See pages 18-19 and the SBJ deal in news this week).
The key dilemma your average broker faces is whether they need to start again? Whether they have the appetite, hunger and motivation to do it? And whether they can really resist the next golden ticket?
The negative assumptions made about the intermediary sector two years ago have been found to be untrue. Recession and a damaged economy have contributed to make stable underwriting profit a priority once again. Meanwhile, the breakneck growth of aggregators, consolidators and structural change has all but stalled. Established entrepreneurial brokers face overwhelming support from insurers and networks to begin again and to encourage young entrepreneurs to start from scratch. The small print of restrictive covenant agreements is receiving scrutiny all over the country and the timing to make the leap is looking just about right.
Fly above the market and a return to a traditional distribution landscape is welcomed by the regulatory powers and clients too. For the past two years the consolidator model has been criticised, torn apart and written off. The chief complaints have focused on poor integration and aggressive client management. But it is no longer just the structure and shape of the consolidator model that is being scrutinised; it is the market conditions it is operating in too. Many are not just falling out of the love with the style and culture of these players; it is about how its national regime may be at odds with a local vibe when times are very tough.
But for every forward-thinking broker starting afresh and contacting old clients, there is an investor looking to back the management teams of larger businesses to go it alone.
In the short term the new start-ups may make a difference on the ground, but it will be the return of investment targeting and funding the medium-to-large players in the second half of the year that should make a difference and restore a more familiar structure to a traditional healthy market.