"Marriages are made in heaven and executed on earth." Well said.
Just like any street-smart young man eyeing a bride who is successful and has assets that make him feel secure about their future, businesses often fall into the trap of eyeing lucrative partnerships. Throughout my career as a consultant, I’ve encountered numerous businesses with investment products like equity, PMS, investment-grade real estate, and fractional real estate investments, that get attracted to insurance agents. "Come on, Dr. Praveen, let’s team up with the insurance agents, the billion-dollar club agents, or other networks of insurance agents and push our products," they often say. The common rationale is that insurance agents earn less on insurance products, so they would be keen to promote higher-commission investment products.
While this narrative sounds fantastic, it often ends in disaster. The reason lies in the fundamental misunderstanding of such partnerships. Investment product companies, whether financial or real estate, tend to eye the network of these brokers without understanding two crucial aspects:
Consultative Sales and Risk-Free Nature: Insurance sales are consultative, largely risk-free, and rely heavily on the relationship between the agent and their customer. Insurance, by nature, is a risk-free product and not an investment product. The objective of buying insurance is fundamentally different.
Risk and Mindset Differences: Investment-grade products, whether financial or fractional real estate, are inherently risky. They require a different mindset and approach when negotiating sales with customers. The customer buys insurance products based on trust, and the entire network of an insurance agent is built on referrals and a closed network of selling.
What happens if an investment product sold by an insurance agent fails? The insurance agent’s reputation and primary business suffer. This has happened in the past with many equity and real estate products that insurance agents sold, leading to numerous case studies often titled "Failed Marriages in Business."
It’s like marrying someone who seems attractive and valuable, but whose strengths and nature are not compatible, leading to a failed marriage. Despite this, why do insurance broker networks or aggregators still push such products? The answer is simple: Greed. Companies offering these tie-ups promise fancy commissions to everyone involved. Some agents take the bait and suffer, becoming case studies themselves, while most experienced agents know better and steer clear, understanding that greed is dangerous.
I have witnessed the failure of partnerships between insurance agents and companies offering investment products on three separate occasions. Based on my experience, I can confidently say that these attempts are recipes for disaster.
On the other hand, I have found success in selling investment products through people or companies engaged in distributing such products. For instance, I recently collaborated with Hbits, one of the leading commercial fractional real estate investment platforms. We strategically tapped into mutual fund distributor networks, equity market consultants, and broker networks. The results were astounding: over 30 Cr of fractional real estate sales in 25 days with just a five-member inside sales team with PMS backgrounds.
Why did this work? Simple. Investment inherently involves risk, and in the equity market, a 12% return is considered good. However, with fractional real estate or REITs, the customer may get a return of 9-12%, but the risk is lower than in equity markets. For the partners, this was advantageous because they don’t earn much from distributing mutual funds or advising on equity. Hence, this partnership had better chances of success and indeed succeeded.
So, to all business and sales managers or corporate strategists considering such partnerships, beware of the consequences. It’s a disaster waiting to happen.
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