Keeping it in the Family (October 01, 2006)

New Hamburg broker Steven Wagler, the incoming president of the Insurance Brokers Association of Ontario (IBAO), is hoping to translate his hometown experience into a model for brokerage succession and broker independence throughout the province.

Since the mid ’80s, Wagler has worked in his hometown of New Hamburg at Josslin Insurance, which can be described quite literally as a “Mom and Pop” organization. Wagler’s parents, Don and Rose Wagler, are partners at Josselin, which Don bought from J.B. Josselin in 1974. Steve’s brother, Scott, has worked with the company since 1992.

Established in 1880, the company has been bought, sold and owned by independent brokers throughout its 125-year history. Wagler points to Josslin’s storied tradition as a model for brokerage succession throughout the province. It is especially important for brokers throughout the province to discuss brokerage succession models, Wagler notes, at a time when “multiples” – a measure of a brokerage’s worth – are rising and brokers are thinking of selling.

Independent brokers could end up being their own worst enemies, Wagler fears, if they choose to sell their brokerages to direct writers or non-brokers, thus reducing the province’s overall pool of independent brokers. Wagler calls this a “moral fibre” issue, and says he plans to open a discussion about it when he becomes president of the IBAO.

“Companies buying the distribution channel is a new phenomenon,” Wagler notes, adding that the preferred form of transition would be one of independent brokers selling to other independent brokers, thus “keeping it in the family.”

Wagler notes his company has transitioned through several different owners since its establishment in 1880. J.B. Josslin bought the company in the late 1940s and sold it to Wagler’s family in 1974. Josslin worked part-time with the brokerage until the firm’ celebrated its 125th anniversary this year.

BROKERAGE PERPETUATION

Wagler is clearly proud the company has stayed in the hands of independent brokers. “We’ve got the automatic succession,” he says. “We’re the fortunate ones, or my Dad is the fortunate generation, compared to some of his friends that don’t have that succession planned. That being said, he succeeded somebody who didn’t have a family succession, so it’s happened [that independent brokers have bought and sold to one another] in the past…

“J.B. Josslin looked after livelihoods of people, employees, and wanted to give back to them because they provided his wealth and growth. At some point, brokers have to transfer the wealth. How do the people who are selling now get involved? If they’re not giving the same opportunity to the next generation [to own independent brokerages], then how are we going to attract people to this business?

“It all fits together. It’s a puzzle, and if you take one big chunk out of it, the other pieces will never join up and you won’t get the young people anymore, or the entrepreneurial types. You’re not going to attract the right type of people. You’re going to have a self-fulfilling prophecy, and the independent broker’s gone.

“I think if there’s one thing I’d like to do, it’s maybe [discuss] this moral fibre issue. I think there’s room for this to be talked about openly. “

Wagler says the brokerage perpetuation issue came up for debate at the IBAO convention in 2005. At the time, brokers noted ING’s acquisition of new brokers through Canada Broker Link. The issue arose once again, Wagler says, when Royal & SunAlliance Canada acquired new brokers by default when its subsidiary, Johnson Corporation, bought Morgex Insurance Group. Wagler says he is interested to see if companies such as AXA and Aviva follow suit. Wagler believes insurance companies may be forced to contemplate the future purchase of brokers, making the argument that they must do so in order to protect their market share. “I’m sure you’ve heard what some of these players are paying for things,” Wagler says. “Certainly it’s an incentive for those brokers who have not done any succession planning and that are basically sitting there like ducks, you know?”

NO ‘SILVER BULLET’

Wagler says there is no “silver bullet,” quick-fix to the brokerage perpetuation issue. He says the IBAO’s role is to communicate what is happening and brainstorm ideas on how to use its resources to facilitate sales of one brokerage to another. “The association is not about buying brokers, but if we can provide tools and information and a communication vehicle to let others know [brokers] who are interested [in buying and/or selling], we could maybe connect them.”

The IBAO might also be able to help brokers assess the true value of their brokerages. In addition, the IBAO must communicate the true value to the consumer of perpetuating independently owned brokerages.

“We need to do a better job as the independent broker in the marketplace of actually marketing what we do,” he says. “We offer choice and independent advice because we have no company ownership of our brokerage. So we all work for you [the consumers].”

Of course, “keeping it in the family” is nothing new for Steve Wagler, who has literally grown up in the insurance business. Wagler was licensed to work at his father’s brokerage shortly after leaving high school. He graduated with a general B.A. in Economics at the University of Waterloo, obtained his RIBO license as a broker in 1988, and has steadily been rising through the ranks of the insurance business ever since. In 1991, he started to work full-time at Josslin, which sells personal lines products and has expanded over the past three years to include commercial lines.

Wagler was active in his local insurance broker association, where he became president in 1998. He joined the IBAO one year later. Wagler cites his work as past president of his local association as a reason why he received a call from IBAO’s chief executive officer, Bob Carter, urging him to consider becoming an IBAO board director. The position offers a potential path to the presidency of the IBAO. Wagler was honoured to get Carter’s call. “One of the things that makes the IBAO really strong is the fact that they don’t have concentration in one area,” he says. “It’s across the province. It [the presidency] moves around. You get fresh ideas. You don’t get ripe on the vine. It stays green and … it’s a grassroots organization.”

UPHOLDING INDEPENDENCE

Wagler says he expects that, while IBAO president, he will be called upon to help make sure credit unions in Ontario are not allowed to retail insurance products from their branches. Similarly, he will be helping to stickhandle the Bank Act review to a final, successful conclusion. Recently, the federal finance ministry elected to maintain the status quo in a White Paper, which means banks are not allowed to sell insurance products or deliver insurance information to consumers through their local branches. Wagler’s role as IBAO president will be to make sure the absence of the issue in the government’s White Paper translates into an absence of the issue from government financial services legislation, which Parliament is expected to pass in April 2007.

“This one’s not over,” Wagler says. “Although we have great arguments, we still have to be present and makes the points understood. They’re not self-serving issues. These are public issues. Our strength is that, in the past, we have demonstrated that we are for the consumer. That’s how we win these lobbies.”

Wagler says his interactions with consumers are the most rewarding part of his livelihood. “It’s a relational business,” he says. “Most people in this business are there for that reason. The second thing is that you really are making a difference in people’s lives. When they need help, you are solving problems.”