In this second installment of the series on strategic entrepreneurship published in VVP, the platform for financial advisors in the Netherlands, we offer ways for independent intermediaries to respond to this consolidation pressure.

Due to consolidation, large companies are increasingly encountering the limits of their growth: an abundance of customers, but a scarcity of staff. In our view, this problem can only be solved by smart use of data and AI.

Special thanks to Marcel van Dijk of MarshBerry – Europe for the inspiration for this article.

Intermediaries were once fragmented and nationally oriented, but this is now quickly shifting to a consolidated and international playing field. In this second part of the series on strategic entrepreneurship, we delve into this significant business trend and offer ways for intermediaries to respond to this consolidation pressure.
“Five Arrows, the investment arm of the Rothschild investment bank, acquires a stake in insurance company Voogd & Voogd Groep.” This 2017 press release headline was about one of the first internationally operating investors entering the Dutch intermediary market. The turnover of Voogd & Voogd (now Alpina) grew from 50 million in 2017 to over 200 million in 2022 through mergers and acquisitions. A recent example of international expansion in the Dutch market is the acquisition of VLC & Partners (formerly owned by De Goudse) by Howden Insurance, which operates in 50 (!) countries. Söderberg from Sweden is also a successful international player, now ranking among the top 5 largest intermediaries in the Netherlands.
What makes the intermediary market so attractive for consolidation? And why are investors willing to invest large sums here? Firstly, intermediaries typically have a loyal customer base with annual recurring revenues, making them relatively insensitive to economic cycles or crises, such as the COVID-19 pandemic. Profit margins are still generous compared to other industries. Additionally, aging within the intermediary sector plays a significant role, both among advisors and owners. The average age is over 50 years. Finally, many smaller intermediaries are hesitant about the necessary deep investments in digitalization and increasing regulations regarding transparency and data privacy. Larger, stronger merged companies have an advantage here, at least according to many buying and selling parties.
Currently, there are still more than 900,000 intermediaries active in Europe. This averages to one intermediary for every 600 inhabitants in Europe. There are significant differences: in the Netherlands, there is one intermediary for every 2,953 inhabitants, in the United Kingdom one for every 6,650, in Germany one for every 442, and in Italy one for every 250 inhabitants. These figures from BIPAR – the European association for intermediaries – confirm that the consolidation trend manifested much earlier in the UK than in the Netherlands, while countries like Germany and Italy lag behind. Consolidation literally means merging. The UK now has 4,000 intermediaries and Germany still has 45,000, while both markets are approximately equal in terms of premium volume. Unlike other countries, both the Netherlands and the UK already have strict regulations (such as a ban on life insurance commissions) and lead in digitalization. These are two other trends that will continue and that many consolidation parties want to anticipate to turn inefficiency into profitability.
Many international Private Equity funds (PE) are now active in the European intermediary market, such as Blackstone, Rothschild, HG Capital, and KKR. They all follow a recognizable buy-and-build strategy, taking a financial interest in a prominent regional intermediary and using it as a platform company to add smaller intermediaries. This ‘stringing beads’ almost naturally creates value, as large companies have higher multiples over revenue than small companies.
Stringing Beads: Acrisure illustrates the potential of this ‘stringing beads’ strategy. It was founded in 2005 by Greg Williams and Ricky Norris in Grand Rapids, Michigan. With a thoughtful growth strategy, the company quickly reached a turnover of 30 million dollars. This success triggered PE Genstar to step in, and with the capital, the company acquired hundreds of intermediaries in the US and various European countries. In the Netherlands, Raetsheren was added. Acrisure now generates annual revenue of 4 billion dollars. The company is expected to be valued at 20 billion dollars in an IPO. For comparison, the market value of Nationale Nederlanden is around 10 billion euros.
“In the heart of every great change lies an opportunity waiting to be discovered.” – John C. Maxwell
In this dynamic time of consolidation, Dutch intermediaries face both challenges and opportunities. As a Local Hero, they have the power to choose their own path amidst the global players. However, maintaining independence and entrepreneurship requires smart strategies and flexible business models. Here are some practical options:
1. Work on Strategic Positioning: Identify your office’s unique strengths. If these are still unclear, consider distinguishing yourself in a niche or specialization in the market and build a loyal customer base. Building a strong brand and business identity is crucial. Clear positioning can attract customers even amidst consolidation.
2. Accelerate Digital Transformation: Invest at least 6% to 8% of your revenue in digitalization to operate more efficiently. Look at what software providers offer and focus not only on the back office but especially on a better digital customer journey. This requires continuous attention to improving data quality. A strong online presence (website, social media) increases competitiveness, especially if you are active locally. Stay alert to innovative developments in the sector, such as the rise of AI.
3. Collaborate and Network: Seek strategic collaboration with fellow intermediaries and insurance partners to achieve economies of scale without full consolidation. Select service providers that offer products aligned with your strategy and are at the forefront of digitalization.
4. Invest in Talent Development and Team Spirit: Invest in staff development to build expertise, not only technically but also in emerging areas such as digitalization, risk management, and compliance. Consider how to turn your star players into a winning team. Start by establishing an inspiring ambition (mission, vision) for your office.
5. Strengthen Customer Relationships, Minimize Bleeders, Maximize Feeders: Focus on building sustainable customer relationships by providing excellent service and truly customer-oriented solutions. Satisfied customers are essential for organic growth. First, determine who your feeders and bleeders are. Feeders are profitable customer segments for your office. Bleeders cost you money because handling costs (visits, emails, phone calls, changes, claims handling) are higher than revenue from commission or service subscriptions.
6. Combine Different Business Models: The commission model seems less sustainable in the trend of increasing transparency. Ensure you are agile. In addition to the service subscription, there are alternatives such as:
• Hourly billing: The more specialized and unique, the higher the hourly rate.
• The platform model: Bringing supply and demand together (in line with your specialty) on a digital marketplace.
• The freemium model: A free basic product or service to attract customers, upgrading to paid options based on their needs.
• Embedded insurance: Seamlessly offering insurance as an integration into a product or sales process. Well-known examples: travel insurance at a travel agency, car insurance at a dealer, or warranty insurance with equipment purchases.
• Outsourcing: Outsourcing certain activities to specialized service providers so you can focus on your core activities. Think of outsourcing specialized pension advice, absence management, or your own IT services.
7. Manage Your Own Financial Planning: Financial stability offers more control over strategic decisions. Be prepared for economic fluctuations and strive for a solid financial foundation. Continuously benchmark and monitor the key KPIs of your office. Engage with M&A (merger & acquisition) experts to understand how they view the value development of your company and how you can optimize it to become an attractive merger or acquisition target in the future. A good understanding of the legal aspects is essential to safeguard your company’s interests.
Big isn’t always better, and sometimes a creative dwarf beats an industrial giant. An inspiring example from outside the insurance industry is Pixar Animation Studios, which in the early 1990s under the leadership of visionary Steve Jobs defied the established order of Disney with their groundbreaking computer-animated films like “Toy Story” and “Finding Nemo.” The highlight of the battle between this David and Goliath came in 2006 when Disney acquired Pixar for over $7 billion. This collaboration between seemingly unequal forces was more than a business transaction and led to creative synergy and extraordinary growth in the entertainment industry.
Jack Vos is a member of the Entrepreneurs Panel, former intermediary, and founder of the high-tech data science company Onesurance.