Considering joining a Cluster/Network/Aggregator? Here's what to look for
Updated: Nov 25, 2020
Clusters/networks come in all shapes and sizes. There are those that are well considered and those that are pretty haphazard in design. Some are truly designed for a win/win between the individual member and the managers/owners of the cluster, while others are designed purposely for one side to gain the majority of benefits. Some are well built and solid throughout, and some have structures that are hollow behind their slick brochures and websites. There are ones that have different value propositions than just gaining access to every carrier plus one and those that fit specific kinds of agencies particularly well. Finding the network that fits your agency, if you want to join one, is critical because once you sign that contract, discovering you chose the wrong network later is painful.
Here are some rules to help you determine which network might fit you the best:
Rule #1: Read the network’s contract. Read it entirely. I’d like to recommend you have your attorney read it too but almost no local attorneys will have any idea of what they need to identify. If you are not familiar with these contracts, hire someone to help you understand what you might be signing. Networks are in the business of getting dozens and dozens and often thousands of agents to sign so they know, hopefully, how to write a contract. This is the only contract of this type you may have ever seen.
I have been contacted by so many agencies over the years who want out of their contracts, that wish they had never signed their contracts, and who are sorry they did not understand what they were signing. An outsider like myself or an attorney can easily proclaim, “Well, you should have read and understood your contract before signing it!” The reality is life is not so straightforward in these situations because people often hate to spend money on an attorney who probably does not know what they are reading and yet, they do not know who else to turn to. Yet, someone needs to read the contract and explain it.
Rule #2: I have heard many people complain about a particular contract I know fairly well. I do not believe their criticisms are warranted. That contract is fair. It is also possibly the best written and best designed network contract. It is also designed for a specific kind of agency in a specific situation.
What some agents think is more fair are loose contracts where the network administrator/marketing rep seems so trustworthy. They think it is fairer because in their minds, problems can be worked out amongst fair minded people later. Loose contracts are often loose on purpose especially if the purveyor of the contract is the party with the deepest pockets.
I will take a well written contract every day in these situations because the rules are clear in a well written contract. Ambiguous language favors the deepest pockets. These loose contracts are only written loosely for three reasons. The writer is truly ignorant, the writer is incompetent, or the writer is really smart and the loose terms are designed with precision.
Because a contract is well written and strict does not make it unfair. Also, if an agency that does not really fit the specifications of the agency for which the contract is designed signs the contract, then arguably someone should have explained the situation better but in my experience, the agency should have paid closer attention too.
Rule #3: Some networks are absolutely designed to take advantage of naïve, unsophisticated agents. Keep this in mind. I am not stating these networks are unethical because unethical and taking advantage of naïve agents are two different issues. The solution to not being naïve is to become educated and hire advisors that know this market.
Rule #4: The Carriers:
A. If you are small or a start-up, a network providing markets as the primary purpose makes sense.
B. If you are an established agency and hear the siren song of more markets, odds are high your agency is a poor performer. More markets are not the solution to your woes. Odds are high your agency cannot meet the sales requirements of your existing companies so if you can’t make enough sales for 10 companies, how is it going to make any difference with 100 companies? The real answer is you get to hide out within the bigger organization. If this is the real reason for joining, you will have more success being honest with your purpose.
Rule #5: Some networks are far advanced by offering and developing a plethora of true, high quality additional services for their members and their members’ clients. Others are pretending too by stating or offering these services but the quality is so poor, it is worthless. If you are an existing agency with more than three markets, determine who has the best additional services, services that are real and proven, and join that network.
Rule #6: Networks, at some level or another, have to manage members’ money and even trust monies depending on how they are designed. No reason exists whatsoever you should not inquire about their controls, the quality of their balance sheet, and the protections you have (i.e., maybe what kinds of insurance policies do they have?). Many people have probably forgotten about the Brooke Corp fiasco but it is worth Googling.
Some networks absolutely take these responsibilities more seriously than others while some seem ignorant. My advice is sign up with the ones that take good financial management so seriously they are willing to prove it to you.
Otherwise, with some network contracts, you will have a strict rope around your neck with no value being provided.
In summary, read and understand the contracts, understand the differences between the networks, and find the network that fits your goals.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.