Talent spilling onto the streets: A Q&A with Mike Sullivan
The accelerating pace of mergers in the benefits space will leave a lot of good talent looking for a new home, says Mike Sullivan of OneDigital.
The COVID-19 pandemic has rocked nearly every facet of our economy. And while the benefits business hasn’t been immune to these effects, many of the setbacks could be temporary. While stay-at-home orders and economic uncertainty may have dampened the market for acquisitions, many industry professionals expect it will heat back up quickly.
The same is true for the health care industry, where even businesses once immune to the effects of economic recession are now stumbling. But the expectation is those that are able to weather the storm will come back even stronger.
Related: A message to brokers and benefits leaders: Time to up your data game
BenefitsPRO reached out to Mike Sullivan, co-founder and chief growth officer of OneDigital, to get his take on the market forces shaping our industry now and in the years ahead.
How has the benefits business changed in the last few decades?
Twenty or thirty years ago, it was about hard work, staying informed, and being an effective communicator who worked hard and built relationships. That’s all still really important, but we are rapidly heading toward a place where platforms are going to do more for clients, which is going to lead to innovation.
You’re going to be part of a connected marketplace where data flows more efficiently across the system and it’s less about which ben admin platform you offer. It’s going to change the way advisors work; it’s going to change what advisors do; and it’s really going to change the competitive landscape.
What impact has the pandemic had on M&A activity in the benefits landscape?
There are two converging dynamics. One is very much facilitating consolidation. The other is just friction. When you’re at home for months, you have time to think about the uncertainty going on. If you weren’t looking to sell before, you’re probably at least thinking about it now.
Also, are valuations ever going to be as high as they are today? And what is probably a more real pending potential change: Taxes relative to capital gains. Biden is suggesting that’s one thing he’ll look at if he wins.
A lot of things are creating significant momentum. There’s never been more buyers or more uncertainty in the marketplace. When you’re all sitting in your homes, you can only do so much. We’re going to have an extraordinary year, but it’s largely going to happen at the beginning and end. In the middle is a ton of Zoom calls.
What will it take to survive in this new landscape?
In every major city, you’ll have 10 to 15 major competitors that have all the tools they need. Two things are ultimately going to differentiate them. The first is a tech platform that allows them to connect in a different way, analyze data and innovate from a solutions standpoint. Having a tech platform that we think no one else in the industry has is going to become a competitive advantage.
The second thing is to establish a culture that creates a gravitational pull toward your firm. If you don’t have the tech and the culture, you will fail.
What impact do mega-mergers, like the WTW-Aon deal, have on the smaller broker community?
The WTW-Aon merger is monstrous, but it has almost no impact on what we do every day. But talent is spilling onto the street and it’s our opportunity to upgrade. Talent is going to find a home where there’s a cultural fit.
Hundreds of transactions will take place—consolidation is coming. Firms are going to get bigger. Some firms will be really good at it and lead with culture; others will do tons of acquisitions and flip to the next guy, and that’s going to lead to a lot of talent on the move.
What impact will outside disruptors have on the benefits space?
There have been big Silicon Valley-funded tech startups, mutual fund companies, and payroll companies that at one point or another decided they’re going to be a broker. Everyone realizes that it is a highly regulated, highly fragmented, localized business with advisors that have very deep client relationships, and it’s very hard to disrupt.
Innovation comes from inside the industry. There will continue to be an array of these outside firms, these new tech startups, that emerge, but they’re not going to disrupt. The ones that work with brokers are going to succeed.
What do you see as the biggest threat to benefits brokers today?
Brokers aren’t thinking about technology in the right way. They think about vendor relationships, ben admin, payroll, point solutions that either push eligibility info to carriers or connect to payroll systems. You have to think about it differently than anything that’s been done in the past 10 or 20 years.
New players will change the way you access data, and what you’re able to analyze. Advisors who aren’t in that discussion better figure out how to get into it.
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