Exit terms & pipeline freeze
Before you even consider leaving a network check the exit terms. The exit terms are the biggest hurdle to overcome when leaving a network. Networks often cite the need for brokers to novate life insurance liability and comply with other exit terms such as returning customer files, complaints, and clawbacks.
The immediate considerations would be:
- Review your contract carefully
- What is the pipeline freeze? E.g. It could be 3-6 months.
- What is the position on run-off cover fees?
- What is the notice period?
- Are there outstanding regulatory fees?
- Is there a time of year when it would be cheaper to leave? E.g. Review the network’s year-end.
If you still wish to proceed engage with your network politely and try and ensure as smooth a transition as possible. Ensuring you can manage a pipeline freeze is often the most crucial consideration before filing a notice to exit.
Research carefully & do not prejudge a network
Times change and so does the management team and culture of a network. Maybe in the past, the network had a great reputation but does the current performance justify that previous reputation? Alternatively, a network with negative reviews in the past may have turned things around and be a great partner.
Take advice from fellow brokers with respect to their experience of their current network.
Work out your priority criteria for a network and research extremely carefully. For many, the back-office customer relationship management system and compliance support are priority considerations.
- Speak with senior management and the leadership team to understand with open transparency whether you are a good fit for each other.
- Review the contract carefully and ignore any pre-sales pitches. The devil is in the detail so examine the terms carefully and check exit clauses and terms carefully.
- Assess the upside and the downsides. No relationship is going to be perfect and the ability to overcome difficulties together will be key.
- Will they compliment your business and how you want to develop your business or does the network want to dictate how you can run your business?
- Speak with as many fellow brokers as you can to gauge the network’s current services. The present and future are far more important than the past.
- Consider independent legal advice on the contract as the terms are going to be onerous in order that networks can try and protect their asset and value for sale.
When you are leaving a network make sure you can manage your cash flow shortfall during the pipeline freeze when you leave network. A minimum of 3-months but ideally 6-months could be necessary.