Several Canadian commercial P&C brokerages are actively acquiring wealth management, retirement planning and employee benefits companies in order to increase their revenues by expanding their product lines.
The simple math suggests that a broader product suite – a range that brings vertical products beyond P&C insurance products – can improve a brokerage’s bottom line.
In most cases, the real assets under management of many of these retirement advice centers are not worth buying alone, said Yan Charbonneau, president of the industry acquisition company. Synex Business Performance insurance.
That’s partly why many of these smaller wealth and benefits advisory firms aren’t consolidating through mergers or bank buyouts. Additionally, while the pre-loaded commission structures for many retirement and wealth investment products allow advisors to earn a living, they do not create recurring revenue that generates cash available for acquisitions.
But cross-selling opportunities can make acquisitions pay off.
“If I can buy a wealth management boutique and then resell [their client base] employee benefits and sell damages to this clientele, then I have something. But if my offer is limited to just the flow that customers already have, then you’re just rolling the volume of business, and why do that? asked Charbonneau. “What I can offer a benefits boutique [as a buyer] is much higher than what another monoline benefits store can do, because I will be selling the whole thing with my P&C store. And the same for the practice of consulting.
“There’s no way to make a profit if you don’t cross-sell. And that [is] basically why monoline doesn’t work anymore.
Cross-selling becomes more natural to what Navacord Executive Chairman T. Marshall Sadd called “multi-line damage-dealing brokers that cover commercial and personal home and auto, and also include benefits and the collective pension side of the company”.
Initially, these cross-sells happen organically. Clients of group retirement and benefit plans can be referred to wealth management advisors after retirement. And business and personal P&C clients can access retirement, wealth planning and employee benefits products.
“Having these people housed in the same space [means] these conversations are happening and these opportunities will come up more often than if it were just happening by referral,” Sadd said. ” They are all [within] the same business, the same brand and these opportunities are, I would say, warmer.
“You get revenue synergies by bringing these businesses together.”
Executing strategy well means bringing sales management structures to acquired businesses and making deliberate cross-selling. “That’s what we’re working on,” Sadd said. “What we do is put in place better processes [at the acquired companies] to accelerate or multiply opportunities.
But you don’t get those results by relying on benchmarks, Charbonneau agreed.
“If we were two different entities, and we made a deal, and I said, ‘I’m going to send you clients and you’re going to send me clients,’ that works. [for around] two or three weeks,” he said.
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