DIVERSIFICATION OR SPECIALIZATION?

This Omaha agency says “yes” to both
and offers clients a menu of consulting services

By Len Strazewski

SilverStone Group executives are (left to right): Principals Glen C. Gahan, Mark Weber, and Grant L. Matthies; and Adam Yale, Director of Investment Services.

Every agency or brokerage looking forward to growth has to eventually decide whether to diversify or specialize, but the answer doesn’t have to be one or the other. The 60-year-old SilverStone Group, Inc., in Omaha, Nebraska, has done both, with a portfolio of special business and personal client services that extend well beyond traditional property/casualty insurance and employee benefits.

In addition to those traditional products and services, the firm also provides retirement plan and actuarial consulting, investment counseling, human resource management consulting, and personal financial management consulting.

By concentrating these services on the diverse set of management-related needs presented by their clients, principals say they have built a base of trust and confidence that has led to increased business and cross-selling opportunities.

SilverStone’s diversification of services over time has led to expansion of client contact, explains Mark Weber, principal and head of the firm’s private client services, which includes executive personal lines and financial consulting. “When you sell property/casualty insurance exclusively, you are most likely to build a relationship with a single individual in the organization who has responsibility for risk management,” he explains. “But when you also provide employee benefits, retirement and investment, and human resource consulting services as we do, you develop relationships with employee benefits managers, human resource executives and chief financial officers, if not the chief executive officers. This gives every aspect of the agency an opportunity to demonstrate what they can do for the client. Nearly 25% of our new business referrals come from inside the organization,” he says.

SilverStone has been building its diversification strategy almost since it was established. Founded in 1945 as a commercial property/casualty agency, the firm became a pioneer in providing loss control and risk management services. In 1959 the agency began providing employee benefits services, merging with an employee benefits specialty agency in 1994.

Benefits are big business

Today the firm has 160 employees and offices in Council Bluffs and Bettendorf, Iowa, and refers to itself as “an independent consulting, actuarial and insurance brokerage firm.” Employee benefits accounts for about 60% of the firm’s revenue and is the cornerstone of referrals to other divisions of the agency, including consulting services that are related to the employee benefits concentration.

Employee benefits have evolved to become a critical cost priority for many SilverStone clients, notes principal Grant Matthies, a 15-year veteran of the life, health and benefits administration field. To help clients deal with their employee benefits needs, the agency added a varied group of services focused on benefits management, including benefit plan analysis and evaluation, administration support, and employee communications. The agency also helps clients evaluate alternative funding mechanisms to replace fully insured health plans, including self-insurance, minimum premium plans and various retention accounting structures.

“Health care costs continue to escalate, and employers are looking for more and better information to help them manage those costs,” Matthies explains. “The days of simple cost shifting—raising deductibles, coinsurance and employee contributions—are pretty much gone and the techniques played out. As a result, health care issues have gotten the attention of a broad range of executives, beyond the level of employee benefit managers and human resource managers,” he says. “Chief financial officers and, in some cases, chief executive officers are getting directly involved with managing these growing costs.”

These executives are demanding more from their agents, he says, and a firm that can supply the resources they want gains a big marketing edge. “Employers are turning to sophisticated data analysis to identify the adverse trends that contribute to their costs and build some awareness within their organizations,” Matthies says.

SilverStone prepares and helps evaluate quarterly, semiannual and annual plan experience reports, assists with carrier or health plan provider billing issues, and reviews administrative services agreements and Summary Plan Descriptions (SPDs), among other services.

Managing plan costs

“Employers are turning to sophisticated data analysis to identify the adverse trends that contribute to their costs . . . ” —Grant Matthies

Matthies says the firm helps clients review their medical claims trend data and explore plan options that target the key offenders. Prescription drug costs, for example, are a key component of health care cost inflation, he says, leading employers to restructure pharmaceutical benefits into three or more tiers of co-payments. “Most of our clients or their insurers are now using the services of Pharmacy Benefit Managers (PBMs) to manage their tiered plans and help reduce their costs,” he says. Wellness programs, including health screenings, smoking cessation and weight reduction programs, are also gaining popularity among employers who hope to reduce their costs at the source, Matthies notes.

SilverStone also recently started to administer worksite programs that market voluntary benefit products paid for by employees through payroll deduction, including life and accident insurance, critical illness insurance and personal disability products. These voluntary benefits “allow employers to meet the various needs of their employees without adding to the rising cost of benefit programs,” Matthies explains. To manage these various benefit activities, SilverStone has created a “virtual benefits center” that includes online enrollment and benefits eligibility services, an employee communications center and a company news bulletin board service.

Retirement benefits also have become an important concern for clients, and the agency’s access to senior executives provides an opportunity to discuss rapidly changing pension and retirement plan issues, according to Glen Gahan, principal and consulting actuary. “Industry has seen a steady shift away from the old defined benefit pension plans and toward defined contribution plans such as 401(k) for private employers and 403(b) plans for nonprofits,” he explains. “Large institutions have been struggling to fund their pension plans for some time, and the problem has become a national crisis. This crisis has created a tremendous need for actuarial and retirement plan administration services.”

SilverStone assists employers with defined benefit plans in calculating funding needs and navigating the sometimes complex requirements of the older style pension plans, particularly issues related to plan mergers and corporate acquisitions and regulatory compliance, Gahan says. The firm also helps clients with the establishment of defined contribution plans, sometimes as replacements for defined benefit plans, but most often as the cornerstone of retirement savings for employees.

Defined contribution plans are less complicated than the older pension plans and easier to fund and administer, Gahan says; but the plan sponsor still has many decisions to make, including the choice of plan administrator, the level and number of investment options, and whether or not to encourage employee contributions with an employer match. Employers still require help in matching the plan design to their human resources needs, Gahan says.

To match or not to match?

To match or not to match? Most employers choose to encourage contributions to defined contribution plans with an employer match, Gahan says, but choosing the amount and manner of the match can require some study. Employer stock used to be a popular matching vehicle, but the proliferation of fiduciary liability lawsuits after Enron and other corporate scandals has virtually eliminated that strategy. Concern over liability has also created a need for independent investment advice, not only in choosing options for the plan, but also in providing investment education to employees.

Adam Yale, SilverStone’s director of investments, provides consulting in defined benefit investments and selection of investment options for other plans, including mutual funds, annuities and asset allocation plans. “Employers literally have thousands of investment options from which to choose as they design their defined contribution plans,” Yale says. “Employers tell us what they need, and we help them match those needs to the appropriate choices.”

SilverStone also provides human resources consulting—the discipline that binds and connects many of the other services. A recent addition to the service portfolio, the human resources consulting division deals with compensation consulting, human resources strategy, job analysis, and executive assessment and coaching.

Protecting high net worth clients

If all these services yield satisfied commercial clients, they will also produce prospective high-level personal lines clients, says Weber, the private client services director.

Weber, who holds a law degree from Creighton University in Omaha, as well as a master’s in financial services from The American College in Bryn Mawr, Pennsylvania, serves as a financial consultant to business owners and executives. His Personal Client Services division provides estate planning, individual retirement consulting, individual investment consulting, personal lines and “family office” services to very wealthy families.

The division targets corporate executives and their personal lines needs, Weber notes, providing both personal lines coverages such as homeowners and personal auto as well as life, accident and disability insurance. However, many of the wealthy executives need much more than insurance policies, according to Weber, so the division also provides more sophisticated personal financial consulting, including estate planning.

Weber describes the process as “high-touch personal service,” which can include experts from other parts of the agency or outside consultants—whatever clients need to manage their affairs and protect their assets. Unlike agencies that limit their consulting to advice about insurance products, SilverStone also provides comprehensive asset management, he explains, drawing on the expertise of full-time accountants, attorneys and money managers. The “family office” provides budgeting, tax planning, cash management and management of charitable giving. The agency consultants prepare agendas and meet quarterly with clients and advisors.

For SilverStone and its clients, the mix of diversification and specialization clearly has been a win-win choice. *