High-end insurance specialist David Byers vividly remembers his first encounter with M Financial Group, a Portland, Ore.-based producer group. It wasn't pretty. "Some of our long-standing wealthy clients left us to do business with an M Financial member firm that was coming into our state. Their product was so much better than what we could offer, it just blew us out of the water. Up to that point, we had thought we were pretty good at what we did," Byers says.

Around the same time, the enactment of Sarbanes-Oxley raised questions about the permissibility of split-dollar insurance transactions by public companies, a type of business Byers wrote. When he discovered that M Financial principals were in high-level talks with Internal Revenue Service officials regarding the legislation, "it indicated to me that the real action was occurring at M," Byers says. "Between them having the best product and doing the most advanced business, it hit me that we needed to seek out becoming an M firm."
If you can't beat 'em, join 'em-if you can. Admission to this exclusive consortium is by invitation only and that's not easy to come by, as the sidebar, "What It Takes To Make The M Team," explains.  Byers' Birmingham, Ala., firm, Capital Strategies Group, did successfully run the gauntlet and today counts itself among the 118 independent shops that are members of, and own, M Financial Group. 

Breaking New Ground
Producer groups were novel in 1978 when a quartet of extremely successful, widely respected, M-named insurance professionals-Carl Mammel, Eli Morgan, Peter Mullin and Mark Solomon-founded M Financial Group. They had two purposes in banding together.

One was the desire to create community. The foursome foresaw an egalitarian collective bonded by a culture of idea-sharing. Today members connect through governance committees, conferences, study groups, Webinars and sabbaticals. Yet even though the founders anticipated being joined by other professionals who shared similar challenges and objectives, growing membership for growth's sake was never in the plan.

The other founding cause was to get carriers to make better products for very wealthy clients. Candidly now, an individual captive agent has almost no power to effect change at the carrier. Nor is a single independent firm likely to arm-twist an insurer into taking steps that benefit policyholders. But could there be strength in numbers?

Yes. Last year, members placed $2 billion of business, about 80% of it life insurance, through M. "You take notice when M provides opinion and advice," confirms Jim Morris, chairman, president and CEO of Pacific Life Insurance Co. "That's true both today and throughout the 25 years we've done business with them," Morris says, noting that M currently accounts for close to 10% of his company's total client account value.

When M Talks, Carriers Listen
An important step in the march toward clout occurred in 1981 with the launch of M Financial Re, a subsidiary that would reinsure half of all business placed through M Financial Group.  As M vice president Jacob Boston recounts, "We realized that to get carriers to do something different in terms of product"-such as more attractive pricing-"we needed to put our money where our mouth was.  We had to put up risk capital."

Although M claims to be the first, if not the only, producer group to form a reinsurance operation, it was not done on whim. M's leaders believed their affluent policyholders exhibited better-than-average actuarial experience. If that was true, couldn't an insurer lower the premiums and still make its usual profit?

Security Life of Denver was the first to say yes to this wild scheme. A second carrier partner, Pacific Life's forerunner, Pacific Mutual, which was seeking an entrée to the independent-agent channel and where M co-founder Peter Mullin had been a career agent, signed on in the spring of 1983.  "In some respects, it took a leap of faith by our early carrier partners," says Boston.  "They knew the M founders, believed they ran quality businesses, and were willing to invest in them."

A Wealth Of Experience
Faith is one thing. Facts are another. By participating in the risk as reinsurer, M had access to its ultra-affluent policyholders' actual experience. By the early 1990s, sufficient data had been accumulated so that when clients' experience across carriers was combined, a statistically reliable profile of the high-net-worth insurance buyer emerged.
Superior mortality experience was one finding, says Dan Byrne, M's chief product and technology officer and a senior vice president. Moreover, the large-dollar policies that the affluent tend to purchase, besides being very profitable for carriers, lapse less frequently than contracts sold to the general consumer, Byrne says.

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