While a brokerage might have an obvious reason to talk about insurance, this market is one that wealth managers need to become more acquainted with if they want to build revenues and enjoy stickier client relationships, it says.

When there’s a battle for wealthy clients and sharp-elbowed competition is in full view, firms are missing a trick if they lack offerings that customers want. And one part of the toolkit that needs attention is insurance, a brokerage says.

In findings last year from a Herbers and Company survey, insurance is pinpointed as a top-five service that clients with over $250,000 in assets seek from their advisors. 

“Including insurance services is practical. If the RIA doesn’t address their client’s risk mitigation needs, someone else will. That someone is probably an insurance rep licensed with a broker-dealer that offers money management. Failure to include insurance services risks losing AuM wallet share to registered insurance providers,” Chad Druvenga, CEO and owner of CBS Brokerage, told Family Wealth Report. Founded in 2007, the firm is based in Shakopee, Minnesota. Services include life isurance, annuities and advanced planning.

“Historically, some RIAs shied away from insurance primarily because of how insurance products are distributed and marketed,” Druvenga continued. “An advisor selling insurance is an agent of the issuing carrier, whereas an RIA owes a fiduciary obligation to the client. Some RIAs feel that the typical agency distribution system isn’t a natural fit in their model.”

“Additionally, RIAs emphasize fee transparency, whereas insurance products provide commissions. Some RIAs feel that providing commission-based products creates a conflict,” Druvenga continued. “Finally, some firms shy away because they don’t possess enough insurance know-how.”

This news service has examined the place insurance has in the wealth toolkit for years – in some ways wealth management is a “risk management” role – as in the case of private placement life insurance, for example, provided by organizations such as Lombard International Assurance and Swiss Life. (Advisors, and those who are trustees, also have risk exposures of their own that require insurance.)  Meanwhile, as threats to HNW and ultra-HNW individuals have grown on the cyber side, so has the field of cyber-insurance, to give another related example. (See other articles on the world of wealth and insurance here, here, here and here.) The need for wealth managers to embrace insurance is not confined to the US market. This news service's Asian channel examined the world of critical life cover, for example, almost a decade ago.
 
As an independent insurance brokerage, it is perhaps unsurprising that it thinks wealth advisors should think more about insurance. But that doesn’t mean that Druvenga’s point is mistaken.

Stickier
In any event, Druvenga argues that RIAs that include an insurance offering will enjoy stickier client relationships. 

Big topics now are how RIAs can justify their fees and improve the stickiness of clients and the NextGen. Insurance is an important element of what RIAs need to have as an offering, he said.

“We can drive big organic growth on the insurance side,” he said, adding that “rising interest rates make this more important.”

Druvenga said CBS Brokerage carries out training sessions and one-on-one encounters with advisors. The firm has built a team to serve RIAs.

“Many times, advisors focus on the need for insurance. This could be to protect against an event (death, disability, or estate taxes). We can quantify and assist them in determining if an insurance solution could enhance a client outcome from a math perspective,” he continued. “We have built a very sophisticated analysis to determine if they [advisors] can improve a person’s situation if we add insurance.” 

Outside of the US, he said CBS has a strategic relationship with Integrity, a firm that is the largest distributor for Prudential UK in the Pacific Rim region. CBS Brokerage is helping this organization to set up US operations.

“Holistic” can be a cliché in the wealth sector, but Druvenga argues that insurance is part of the hard reality.

“Clients increasingly expect financial advisors to be resources across their entire financial lives, including insurance and annuities,” he said. “Clients want a more holistic approach that includes insurance and other ancillary services, such as tax, estate, and trust services. Not only do clients demand it, but including insurance services is optimal for most RIAs, too. By internalizing insurance advice and delivery, the RIA is assured that any recommendation complements the financial plan.” 

Druvenga is a big fan of using case studies in client presentations to show insurance’s worth.

“By segmenting an advisor's book, we can create scenarios and show them where we can enhance or improve a client’s situation with the implementation of insurance. Client segmentation allows us to identify and begin dialogue with clients that have similar profiles,” he concluded.