Is the Pump and Dump coming?
This post original appeared on Linkedin on May 26, 2023, and is written By Scott Nichols.
What is the end game for the vast conglomerates who have bought up our Medicare and wealth management industry?
This was a question put to me at a recent NABIP event.
I didn’t have a good answer, so I decided to talk with people I know involved in these relationships to get their thoughts.
One particular theory caught my attention. A pump & dump.
A pump & dump was featured in the movie “Wolf of Wall Street.”
It is where a company follows a strategy to inflate its IPO (initial public offering) stock price. Once this is achieved, the top corporate executives (who own the lion share of the stock) sell off their stock at the height of its price. This sparks a selloff and the stock price collapse.
Above is a video version of this article for your enjoyment
The top corporate executives resign soon after they sold off their shares and leave the remaining employees without jobs, leadership, and worthless stock in the company. If this scenario were to play out it with these conglomerates it would leave agents scrambling for any FMO outlet to park their carrier contracts.
Most of the old guard FMO’s have sold out their operations to these conglomerates. Since the carriers have decided to no longer appoint FMO or NMA brokerages, this will leave a huge vacuum in the industry.
Carriers went “all in” on these National Distribution Partnerships. They were overcome with greed at call center operations and bonuses paid out by hitting their quotas. My opinion is when the IPO’s launch and the dump occurs their may be no distribution channels left.
This will leave carriers and agents in the Medicare space scrambling and looking very bad to their partner in this field…….CMS.
Those who I spoke to that are in these conglomerate relationships say they are seeing signs of things that are about to happen. They told me the conglomerates are tightening their belts ahead of an IPO announcement forthcoming.
The marketing money has dried up and is not coming down the pipeline to lower level brokerage operations. Staffs are being cut and operations are being relocated to a centralized office.
The buyouts are slowing down to a crawl and the huge events with gigantic sized checks going to employees have stopped happening. Many of the three year buyouts are coming to there end and so will the bonus money based on keeping the status quo or growing a bit.
The old FMO leaders can stay on as employees if they wish, but the big pay day opportunity has come and gone. Most likely, the old guard will take what they can get and ride into the sunset.
The employees and agents they sold out will be left to deal with a massive centralized conglomerate that owns their business and shares all their client data.
A tightening of the belt is always a sign that a corporation is about to go public.
They must show a health and robust balance sheet to max out the IPO stock value.
Could a pump and dump be just over the horizon for these conglomerates who bought up our industry?
Agents need to find a brokerage partner away from these conglomerates and get their contracts transferred quickly. They could face serious consequences to their ability to conduct business if they delay.
–Scott Nichols
