Opportunity knocks for independents: it's fat city for independent brokers today—and not just because of Eliot Spitzer's investigation, which has companies wondering just who exactly their broking bedmates are

Risk & Insurance, July, 2005 by Lawrence Richter Quinn

Adds Bianca Miller, director of corporate treasury at Santa Clara, Calif.-based Yahoo! Inc., which brought in ABD about 15 months ago to replace one of its Big Three brokers, "This isn't a question of big versus small, it's a question of mediocrity versus excellence and having higher standards."

Yahoo! has no risk management department of its own and uses ABD almost as an outsourced risk management department (although it works with Aon as well and says it's pleased).

"They don't wait for us to call them," Miller says. "They call us whenever they come up with a new idea or a thought about our current risk management practices. This is high praise for them. They'd have an office here if we allowed them to."

Beyond service, there's a variety of reasons why corporations of all sizes are turning to the independent broker firms.

Key among them is that many independents are privately held. "Because they're not public companies, they don't have to worry about analysts and stock brokers," says John Matthews, corporate director of risk management at Harrah's Entertainment Inc. in Memphis, which works with Beecher Carlson, Memphis-based Menard Gates and Mathis, and Palmer & Cay. "They're not always looking to increase the top line and decrease expenses. They're focused on giving the customer good service rather than the stock price."

And although the independents traditionally have been shunned by multinationals because they lack a bricks-and-mortar network of international offices, that's less and less the case because of the improved technology that gives the independents the ability to share data worldwide.

Today the independents can call on the services of internationally-based broker networks that will service their client needs at a fraction of the cost of owning their own offices abroad. At least four such networks exist to help the independents and their clients.

Beyond these issues, corporations are impressed by the caliber of talent the independents are attracting (usually from the Big Three) and are pleased that they find themselves dealing with the same brokerage representative year after year, often the same individual initially signed to the account.

"Beecher has been able to hire and to a great extent retrain high-caliber people within their groups. We are able to know our key people within their network on a frequently more intimate basis because of its smaller size and they seem to know us very well. And our access to these people tends to be very good," says Marriott's Mastrapa.

Not all former employees get offers from the independents, of course. Richard Hylant notes, for instance, that after Marsh let 13 of its 19 Toledo-based employees go, he interviewed almost all of them and has made an offer to only one candidate.

"I was really looking forward to working with a few of them, but they just wouldn't fit into how we do things," he says, "and some of them even admitted it."

BIG THREE STILL DELIVER

But make no mistake. Marsh, Aon and Willis, still have massive clout in the marketplace.