Insurance and annuities play an important role in financial plans. But advising on them requires the appropriate liceneses and registrations. For RIAs, an OID can be the conduit for accessing zero-commission annuity and insurance solutions for clients.
When talking to clients or other parties about their work, most financial advisors tend to lead with wealth and asset management. This makes sense, given that successful retirement planning is predicated on your clients having sufficient money to live comfortably for years after they leave the workforce. However, it should also involve helping them plan for the unexpected, delivering comprehensive financial plans that transcend portfolio allocations alone. That’s where insurance can play a key role.
Of course, some advisors lack the appropriate licenses to offer life insurance and annuities, and therefore shy away from offering these solutions. This hurts both parties. The client is missing out on a comprehensive array of financial services, vetted by the advisor they know and trust, which could ultimately shore up their retirement defenses. Meanwhile, the advisor limits their client set and forgoes potential revenue. They may ultimately direct clients to an insurance agent who, in turn, might try to push an array of irrelevant products.
The joint RetireOne and Midland National 2022 RIA PARI Survey revealed that 37 percent of registered investment advisors (RIAs) don’t offer insurance. This translates to nearly four in 10 advisors being unable to deliver truly comprehensive financial planning services to their clients.
It’s easy to understand. Earning an insurance license can be time-intensive and rigorous, and for more established advisors, it might distract from other essential elements of serving their clients and running their business.
However, it’s becoming more and more apparent that the future of financial advice involves taking a holistic approach. And the data agrees. Our PARI survey revealed that nearly two-thirds of firms offer insurance either directly (they are insurance licensed), or by partnering with an outsourced insurance desk (OID) to provide coordinated insurance planning capabilities. Advisors who aren’t offering insurance will likely struggle to remain competitive.
That’s where an outsourced insurance desk can truly act as an asset to the firm, supporting its advisors’ abilities to deliver insurance products and solutions that are best suited to clients’ needs.
What is an OID?
In short, it’s a modern solution to the challenge at hand for advisors who are not licensed to offer insurance. Partnering with an OID enables RIAs to integrate zero-commission annuity and insurance capabilities into their practices, regardless of whether the advisors at the firm are licensed to sell insurance or are registered with FINRA.2 By taking on this portion of the insurance planning process, the OID offers two layers of risk mitigation.
Firstly, the advisor can transfer certain client risks to an insurance company; and secondly, the firm itself can transfer transactional risk to the OID and their broker-dealer. In essence, the OID acts as an extension of the advisory firm’s services, serving as the agent of record that provides ongoing services and support for all client policies. By handling everything needed to meet suitability standards and comply with the Securities and Exchange Commission (SEC)’s Regulation Best Interest rule, the OID adds tremendous value to both the advisor and the firm. The advisor is added to the policies as an ‘advisor of record’ and is therefore able to see the assets on their advisor desktop, manage subaccounts if available, and in many cases bill on the assets directly. Voilà, more holistic advice.
How an OID Can Drive Growth
Dimensional’s 2021 Global Advisor and Investor studies indicate that RIAs in the top quartile enjoy more growth in their assets under management (AUM) and more revenue, while onboarding higher-AUM clients than their bottom-quartile competitors. Among the key differentiators for these thriving firms? You guessed it—annuity and insurance offerings (see Table 1 above).
Outsourcing a firm’s insurance needs can yield multi-pronged benefits for a wealth management firm and its advisors. Through an OID, financial advisors and RIAs can access a fiduciary marketplace of annuity and insurance solutions to help clients create strategic and tailored retirement plans. As OID, RetireOne offers modern advisory solutions, e.g., instant data connections on the advisor’s desktop.
This affords the advisor and their client greater visibility into the full scope of their portfolios, as annuities are no longer held away and ignored, but rather visible in plain sight alongside all the client’s other assets.
The OID platform can also act as a safe harbor. RIA firms whose growth strategies focus on helping advisors transition from the commission model to the fee-based model may find that partnering with an OID enables them to bring more client annuity assets with them during the transition. The benefits are bilateral: the client is afforded the convenience and peace of mind associated with having all their assets managed under one umbrella by someone they trust, while the advisor taps into new revenue streams and is empowered to deliver the best advice experience possible.
At the end of the day, holistic planning services can give advisors a competitive edge. In today’s world, RIAs who tout comprehensive retirement planning and wealth management services should incorporate insurance and annuity planning into their models. Firms must place clients at the heart and center of their business model —this means accommodating their needs with an entire suite of services designed to help them meet their goals. By partnering with an OID like RetireOne, a firm can experience growth in their business, empower advisors, and further satisfy their clients with a more robust and complete set of services.