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Here’s Why Broker Consolidation Could Last Decades

August 7, 2017

Consolidation in the brokerage industry is being driven by an aging broker demographic and uncertainty about the regulatory environment, BenefitsPro writes. And neither of those factors are likely to change soon, which means the pace of mergers and acquisitions is likely to continue, according to the web publication.

Many brokers are getting close to retirement age, and that trend isn’t going to stop for the next 10 to 15 years, Dave Evans, senior vice president at Independent Insurance Agents and Brokers of America, tells BenefitsPro. That will continue fueling mergers and acquisitions in the brokerage space, he tells the web publication. Meanwhile, brokerage practices continue facing more and more regulatory requirements that demand substantial investment in technology to comply, BenefitsPro writes.

Chief among them are the Department of Labor’s fiduciary rule, which purports to force retirement account advisors to put clients’ interests first, and the Affordable Care Act, according to the web publication.

Now, the fate of these regulations is uncertain as they both face opposition from the current administration, BenefitsPro writes. But even if president Donald Trump doesn’t succeed in repealing Obamacare and the DOL rule, his administration is likely to revamp regulations in other ways, BenefitsPro writes.

That means more uncertainty for the brokerage industry — which could be a “catalyst” for older brokers to sell their practices, Evans tells the web publication. And there are other factors that favor larger practices over smaller operations, including the ability to offer specialists across various fields under one roof, as well as the capacity to make investments in technology, he tells BenefitsPro.

But the pace of mergers and acquisitions in the brokerage industry may also make independent practices more appealing, Bob Reiff, the president of privately-owned independent brokerage Lockton Benefit Group, tells the publication. Reiff says his company has benefited from the spike in deals, which he says are “very distracting for producers as well as the client base,” according to BenefitsPro.

By Alex Padalka
  • To read the BenefitsPro article cited in this story, click here.