McGuinness Founder Credits ‘People Leverage’ for His Success
Not many companies can make a buck acting as a middleman between two divisions of another firm. But the McGuinness Group, a Newport Beach financial marketing company that specializes in wholesaling insurance products and energy partnerships, is doing just that.
The company has done it so well, in fact, that when California Business magazine published its annual ranking of the state’s largest privately held companies last month, it listed McGuinness Group in 17th place, with $783 million in revenues.
That is a very big number for a company with just 65 employees, even if it has built its business using what founder and chairman Vincent J. McGuinness calls “people leverage.”
The figure is in fact misleading and reflects the peculiar nature of the McGuinness Group’s business. As a wholesaler, the firm this year expects to move nearly $1 billion worth of annuities, life insurance policies and energy partnerships to brokers around the country.
That does not mean it had a billion dollars in sales in the traditional sense. The closely held firm will not disclose its actual operating revenues, but McGuinness did say the company earns a 2.5% commission on the energy partnerships it sells--and that is more than it earns from any of its other products.
Even $10 million or $15 million in annual revenue is not bad for a young service company, especially when business volume has tripled within three years. And the secret to the success, according to McGuinness, is really no big secret: top-notch sales, service and customer support.
As McGuinness, 53, said in a recent interview at the company’s offices in Newport Center, his firm plays the middleman between the creators of financial products--primarily insurance companies--and the brokers and agents who sell them at retail to customers. In one case, McGuinness actually sells Prudential insurance products to Prudential stockbrokers.
That is where the people leverage comes in: “Last year, with 65 people, we reached 4,000 retailers, who in turn did business with 20,000 investors,” McGuinness said. “To the extent that we can be clever enough and add enough value, we can use their salespeople to multiply our sales.”
McGuinness himself was a pretty good salesman in his day. A Marine Corps veteran and one-time stockbroker, McGuinness made a $15-million fortune selling mutual funds in the late 1960s and actually retired briefly before using $500 in cash to found the McGuinness Group in 1974 as a sole proprietorship.
Seeking a way to stick close to his expertise in wholesaling financial products, McGuinness recognized the potential of a then-new investment called an annuity, which allows an investor to gain tax-deferred or tax-free benefits at retirement or death. He established a relationship with Executive Life Insurance Co., through a business acquaintance, and began marketing that firm’s annuity to brokers.
The alliance was eventually replaced by linkups with other insurance companies, including Pacific Fidelity Life. William Busler, president of the annuities division at Aegon USA, the parent company of Pacific Fidelity, said that using the McGuinness marketing organization enabled the company to keep overhead costs down and still get exemplary marketing services.
And McGuinness got a big break three years ago, when Prudential asked the firm for help in selling new single-premium annuities.
Prudential, according to McGuinness, had been frustrated in efforts to develop synergy between its life insurance business and its newly acquired Bache brokerage network by having the brokers sell Prudential investment products. The cultural gap between the two institutions was just too big.
“We are the interface between the insurance company and the brokers,” McGuinness said. “We act as translators, getting them to speak the same language.”
In practice, what that means is that McGuinness provides marketing support services for the brokers that the parent insurance company is unable or unwilling to provide on its own.
With direct access to Prudential computers through its own computer system, McGuinness can instantly provide the Prudential brokers with an array of information on products, sales performance and customer histories.
This arrangement has apparently worked well for both companies, as evidenced by McGuinness Group’s enormous growth in recent years. The only liability for McGuinness, in fact, is that such a close relationship with Prudential has made it difficult to recruit other insurance company clients.
“One of the toughest things is to run a business like this and also find new insurance companies,” McGuinness lamented.
Partially for that reason, the company has branched out into the sale of oil and gas income partnerships in conjunction with the Swift Energy Co. It also made an aborted entry into the real estate partnership business, pulling out in the face of a softening market.
But now, McGuinness is refocusing on annuities with a new product called the Endeavor Variable Annuity, which offers the investor a choice of five separate investment funds. The policies are issued by Pacific Fidelity Life, but the funds are managed by portfolio managers hired by McGuinness, and McGuinness has all rights to the Endeavor name.
This arrangement will permit McGuinness to maintain the Endeavor product through another insurance company, should the relationship with Pacific Fidelity ever sour, McGuinness said.
For a financial middleman, a very little bit of independence helps.
