The Right Insurance Partner: How to Avoid Culture Clash
Since the AICPA relaxed the contingent fee rules, CPA firms have flocked to insurance as both an urgently needed client service and a new source of revenue. However, even the largest and wealthiest accounting firms don't have all the technical and managerial expertise necessary to serve a diverse client base in such a specialized discipline as insurance. The solution typically has been to affiliate with an insurance partner--a licensed professional who can handle all of the technical matters related to the firm's insurance business. However, after two years, many firms are already on their second or third insurance partner. Few relationships are living up to original expectations. The overwhelming reason is culture clash. CPA firms have a relationship culture. Their business model is based on hourly billing; partners and staff build client relationships on many hours of hard work. Insurance agents, on the other hand, use a transactional model. While they may draw on knowledge gained over a long career, the value of their work is often reflected in a single transaction that may take comparatively few hours to accomplish. For CPA firms, the challenge is to select an insurance partner that can bridge this fundamental gap in culture and business model. Given the differences between CPAs and insurance agents, how does a firm choose the right insurance partner? WHAT TO LOOK FOR There are a number of important factors CPA firms should look at when selecting an insurance partner. Qualifications. The most basic characteristic is to make certain an insurance partner has the proper licensing to conduct the kind of business your client base requires. Many states require professionals providing insurance advice for a fee to have a life insurance policy analyst license. Some CPAs know a great deal about insurance and advise their clients accordingly, adding this service to their hourly bills. Nevertheless, they may need a license to do so. CPAs should check with their state insurance department as to the licensing requirements in their state. A firm should make sure all representatives of an insurance company who handle client accounts carry the appropriate licenses. If your firm's insurance business plan calls for selling variable annuities or variable life policies, your insurance partner will need * An NASD series 6 license (investment company and variable contracts representative license) or the series 7 license (general securities representative license). * An NASD series 63 license (multistate license). * An affiliation with an NASD licensed broker/dealer. Personal qualities. CPA firms should choose an insurance partner that has a reputation with clients and other CPAs that will reflect favorably on the firm. The partner should also have a background in providing services to Similar types of clients. Look for a partner that meets exacting standards in terms of its financial solvency, reputation and the lines of business it offers. Perhaps most important, the partner should have a professional attitude that enhances the firm's goal of providing clients with access to specialized expertise--not on the number of policies sold or the amount of money made. Core competencies. An insurance partner should understand and be experienced in delivering the types of transactions and insurance services the firm's client base needs most. If your client base most often uses whole life, you shouldn't select a term-life expert--the two specialties aren't interchangeable. …