The father is a successful insurance agent. He has supported his family and has grown his business to where he needs supporting employees. During the growth, his son or daughter grows up and, whether as a way for them to make money during their youth or by design, they become familiar with the insurance agency business. When they graduate from college or perhaps after high school, either after a foray into other jobs or directly out of school, they join the agency.

Many agents make the egregious blunder of giving their children an office, a title and a wage that is greater than what the agent would pay anyone else for the same quality and quantity of work effort. After all, they need the money.

Fast Forward 25 to 35 years—

Dad is now in his late 50’s, 60’s or even approaching 70. The son or daughter is now firmly ensconced in the agency business and either has captured the intricacies of underwriting, sales, service and administration, or has not. The next generation probably has a family of their own and begins to see the older generation as a roadblock to his generation of sufficient compensation to properly support his own family. If the potential successor is in his 40’s or 50’s, he feels that he can operate the agency as well or better than the older generation.

We rarely find the next generation without ANY virtues needed to perpetuate the agency. In some cases they have been well-prepared. But we often find this next generation with LESS of those virtues than their parents had. Sometimes it’s just the ‘Silver Spoon’ syndrome. From the time they were in their 20’s they knew, expected and were increasingly impatient for dad to yield the operation and then the ownership of the agency. The next generation generally believes that they know more and can operate the agency better than their predecessors. Of course there are some notable exceptions to this rule.

We have certainly encountered agents who brought their children into the agency properly, from the bottom up, not advancing them in responsibility or in compensation until they mastered the basic jobs first. Once the potential successor mastered each of the jobs in the agency, he was trained in sales and began building his own book of business that supported his growing compensation. Only when he proved able to understand and gain command of every job in the agency including sales was the successor given management responsibility. That management responsibility did not come fast nor was it comprehensive. It began with project management and grew to personnel, productivity and production management. Only when the successor proved capable of running the agency did the parent feel free to perpetuate the agency through the son/daughter/ generational successor.

But these are the notable exceptions, rather than the rule. Most generational succession in agencies is still accomplished through the children of the owners. In most cases the next generation is not properly prepared for succession. Nor are they motivated by the same hunger and panic that forced their parents to work long hours and do whatever was necessary to grow the agency. By the time the next generation is ready to take control, the agency already generates sufficient revenue to sponsor both the older and younger generation because it has done so over the years that the next generation was ensconced in the agency. The next generation sees the departure of the older generation as potentially giving up some of the old owner’s existing compensation for a number more years and then enjoying both the new owner’s compensation and a bonus of the compensation of the retired owner.

So here is the problem. The old owner loves his children, or he loves the younger staff members who are his successors as if they were his children. You don’t FIRE your child, especially if you still want to live with his mother. Not only do you feel parental, but the next generation knows that. So, you let him get away with things that you would not permit in any other employee. You always see his/her “potential” and believe that once he ‘grows up’ he will achieve that potential. You never see that you are the reason that he can’t live up to his potential because you ENABLE him to do less than stellar work and still be rewarded. Some parents or bosses are European Critical*. Others realize the error of their ways but don’t know how to resolve the problem without losing the successor as the result of a 180 degree change of attitude and treatment.

*definition: European Critical = Sonny is “expected” to succeed, so no praise is necessary nor should he expect it. You didn’t get praise for working hard and doing a good job, so he shouldn’t either. But if he doesn’t achieve the results expected, criticism is doled out as an educational tool (of course), very liberally – and sometimes very publicly so the employees can see that you’re not playing favorites with your child. This was a strong trait of Eastern Europeans and they often brought this practice with them and taught their children accordingly.

The end result is that, as time goes by, the old owner feels that he is in a corner. He knows that the successor may not be able to continue the business growth and success, but he can’t do anything about it, just perpetuate the agency and hope for the best.

From the successor’s standpoint things are not much better. He feels that he has been worked harder, sometimes for less remuneration, and has been less appreciated than anyone else in the agency. After 15 or 20 years in the job, he feels they have a good grasp of running an agency and understand the new carrier and client attitudes better than the old owner who seems stuck in the past “back in my time…” The successor is probably responsive to automation issues and knows how important they are to the agency’s future. The successor may have established on-going carrier relationships and may have built a strong and loyal customer base – but the old owner doesn’t recognize the contribution of the successor or the need for changing agency operations. The successor loves his/her dad or mentor, but would love to be recognized for his contribution to the agency in responsibility, in compensation, and in ownership; and he wants be given the ability to mold the agency into his vision of the future.

The successor is as frustrated as the parent. Both love each other and recognize what each is doing for each other, but they can’t break the impasse to permit a smooth transition from one generation to another.

If the situations are not resolved, the father might hang on for much longer than he should in order to enjoy his later life while still able to do everything he wants with his loved ones, and the younger generation may not be able to take over until it is too late for him to both pay the older generation the value of the agency, build it to a larger value and perpetuate it again. Or, another common result is the abrupt transition of an agency and a long, tortuous period reorganization during which financial reverses and a slow-down of production, greater than expected erosion of customers and personnel transitions occur.



1. The problems of agency succession through family members and/or other generational successors cannot be resolved without being uncovered and discussed openly between the generations. Either do this yourself or use a facilitator. Agency Consulting Group is available and performs many such assignments (800) 779-2430.

a. The agency owners and the agency successors each identify the Strengths/Weaknesses of the successor(s) in the following categories as well as any additional categories that may occur in the agency: agency transaction processing, personnel relationships, compensation vs. productivity and/or production, customer relationships, agency automation, carrier relationships

b. The agency owners and the agency successors each identify the Strengths/Weaknesses of the agency owner and of the agency in the same categories.

c. The owners and successors critique the written Strengths and Weaknesses identified and establish and agreed-upon common ground of issues that would make the successors stronger as perpetuators and are agreed to be issues that need remedied in the agency to make it stronger.

2. Note that the Succession Plan that is being built attacks the areas that trouble either the owners or the prospective owners and comes from a position of strengthening the agency, not criticizing the individuals. Once the common lists are generated, a Plan is created to progress areas of weakness and use areas of strength of both the successors and the agency and its owner in the evolution of the agency from one generation of owners to another.

a. Create Action Plans for the transition of weaknesses into strengths with monthly markers (benchmarks) to measure the progress of each Action Plan.

Most agency owners are seeking a comfort level from which to rationalize their transition of ownership and management of the agency. Even if every Weaknesses has not yet been converted to a Strength, the simple activity of the Action Plans defined by their Benchmarks will give the owner a growing comfort that the successors are doing that which is necessary to make the management and ownership transition successful. The successors must remember that the owners have wanted the succession plan since they hired the successors. Any resistance stems from the open question of whether the successor can successfully maintain the integrity of the agency once the old owner has relinquished control.

Of course every solution has caveats, as well. There are some owners who enjoy the ego boost of ownership and even the adrenaline rush of encountering and handling crises. If they have no outside interest or have no one beyond their career with whom to share the rest of their lives, these owners may “talk” a good game about succession and perpetuation, but may never be ready to turn over the reins. They know that their younger generation may be ready and that the carriers have harassed him about internal succession to maintain the integrity of their books of business and growth potential. Their customers may have asked about perpetuation as they judge who they should be using to counsel them about their insurance over the long term. So the owner proudly marches out his “next generation” even though, way down deep, he has no intention of yielding ownership or control. In many cases their attitudes are of the “pry it loose from my cold, dead hands” school of thought.

If you think that you are facing this type of owner, you have one of three very dramatic choices to make:

1. resign yourself to being second-in-command for the remainder of the owner’s life – but make sure that sufficient life insurance exists in the name of the agency to buy the asset from his estate (not applicable if you are his only heir).

2. approach the owner with the option of giving you more management responsibility without a change in ownership (to provide you the tools necessary if and when the inevitable occurs).

3. approach the owner with the need for a management or ownership transition in order for you to remain with the agency. This last approach only works if you are acknowledged to be a strength in the agency (i.e. strong manager or strong producer) and are young enough to move, with or without your book of business, and build a stronger, more secure future in another organization.

Another alternative qualifies the successor for “phantom stock” that is a letter agreement that, if and when something happens to the owner, the successor is warranted ownership in a specified number of shares of the agency. Since it is phantom stock, to change of control or ownership is implemented until the sale, retirement or demise of the owner and the successor then claims the stock rights. The strike price of the phantom stock could also be pre-agreed as the transactions occur, limiting the tax liability when a triggering event occurs.

There are many, many ways to perpetuate agencies internally and many obstacles to successful agency transitions. BUT ACHIEVING AGENCY VALUES AND FINANCING IS NO LONGER ONE OF THOSE ISSUES. Anyone who expresses a primary concern related to finances and getting the appropriate value for an agency in transition is either unaware of the financing potentials or is really not interested in transacting the agency. We invite any agency interested in succession planning or internal perpetuation to contact us at (800) 779-2430 to discuss the process. The sooner this is done the better. The closer to the desired transition date that we start the process, the fewer options are available for financing.