Flush with data demonstrating its policyholders were cheaper to insure, the next step was logical: create products priced specifically and exclusively for M's wealthy clientele. You see, in all the years M had been working with carriers, "we shared our experience data with them, from which they then built products they made available not only to us but to others as well," says Fred H. Jonske, M's president and CEO.  Now, no more Mr. Nice Guy.

Suddenly-incredibly-M had something no one else had:  the poop on the high-end insurance purchaser.  "Carriers were blending the experience of their high-net-worth buyers with that of other buyers," Jonske says.  From that point forward, keeping the database private, as well as purely affluent in order to be able to reflect M clients' superior experience in premiums, became organizational imperatives.

"So that our firms could take advantage of this intellectual capital and provide a truly differentiated value to their clients, we introduced proprietary products in 1996, which only our firms may sell," Jonske says.  Today there are 23 proprietary offerings from seven carrier partners.

'Proprietary' Is Not A Dirty Word
To the wirehouse stockbroker, a proprietary product often is one you have to sell. At M Financial, it's one you get to sell. In point of fact, members may sell whatever they like, keeping in mind the requirement to place most of their business (at least $600,000 annually) through M.

In building product, M uses its precious experience database to engineer an insurance product-a universal life policy, say-then approaches a carrier. As Byrne explains, "We give the insurance company sufficient information about our clients' experience so that they understand the pricing we're recommending and the projected profitability."

Yet M's proprietary offerings feature more than an attractive entry price. As a reinsurer, M can (and does) monitor its policyholders' actual experience in order to compare it to the assumptions contained in the illustration to the insurer. "Every product has a profit objective," Byrne says. If the earnings objective is exceeded because mortality turns out to be better than was assumed or expenses are lower, the excess profits are returned to the policyholders (a la a mutual insurer) via lower premiums going forward.  Since 1998 nine in-force re-pricings have been implemented, reducing premiums on existing policies by more than $40 million, M officials estimate.
"
We devote an enormous amount of resources to in-force management because it is a tangible value that we bring to our clients," says Lawton "Mac" Nease III, an M board member, chair of the organization's product development committee, and president of M member firm Nease, Lagana, Eden & Culley Inc., in Atlanta. It also helps members in the field.  Picture an M producer dangling an attractive initial illustration in front of a prospect.  Then, the coup de grace:
"Your premium might improve later with our in-force management."

"The proprietary product is huge," says Byers, and not just because that's what lured away the clients he referred to at the start of our story. When his firm was outside M looking in, "insurance was a commodity and the expertise we surrounded it with was our differentiator.  Now to have a product that is not a commodity gives us a whole different value proposition to the advisors we work with," Byers says.

The proof? A large family office recently approached Byers, as did an accounting firm with a significant asset-management practice. According to Byers, "They said, 'We might be interested in outsourcing our entire insurance business to you because we know you have the best product and you do it right.'"  His fortunes reversed!

Meanwhile back at the Portland headquarters-where a staff of 150, including attorneys, CFPs, CLUs and a dozen actuaries, supports member firms' activity-Byrne observes that often in commerce, the next customer is more attractive than the one you already have. He boasts, "Through the in-force management of our products for the benefit of existing policyholders, we can say, 'Our last customer is as important as our next customer.'"

What It Takes To Make The M Team
"To find one firm that is the kind we are looking for, an average of 12 to 18 go through our internal membership review process," says the president and CEO of M Financial Group, Fred H. Jonske. Successful candidates tend to be entrepreneurial, open to sharing ideas, and extremely successful working with the ultra-affluent.