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Blurred Lines: How To Connect Client Value To Revenue Value

As agent and advisor practice models continue to blur, advisors who have traditionally focused solely on insurance solutions now have an opportunity to be top performers in their markets by expanding their offerings.

The types of products and services offered by insurance advisors have expanded over recent years to include investment solutions, estates and trust planning, and retirement planning. LIMRA and EY research finds that the most successful insurance advisors have incorporated these solutions into their practice.

What Is Success? How Is It Measured?

In an industry that has traditionally relied on the volume of transactions to drive sales, advisors must rethink their approach to truly grow their business. Advisors need to ask themselves, “Should I focus on increasing the number of clients served or would it best serve me and my existing clients to take a holistic approach for each of them?” The latter has shown to have impactful results for insurance advisors.

Traditional metrics, such as number of clients an advisor serves or amount of premium written, only tell part of the story. To get a better picture of success, advisors must consider how efficient their practice is, the depth of their advisor-client relationships and, most importantly, their areas of potential growth.

Gross revenue per client is one metric insurance advisors who are looking for strong and sustainable growth can use to measure success.

How Can GRPC Measure Success And Drive Growth?

Gross revenue per client is a measure of how much revenue is derived from a client. The average GRPC of an advisor’s book of business is calculated as total gross revenue divided by total number of clients. GRPC can be applied on an individual or a firm level.

Advisors must first understand what segments of their clients and prospects can be better understood by using GRPC. Three of the most impactful areas include:

Identifying clients with low GRPC: Advisors can target these clients for additional products/solutions by reviewing their current situation, and reevaluating plans and goals with a holistic approach.

Identifying clients with high GRPC: In these situations, advisors want to ensure that they keep these clients by focusing on maintaining a strong relationship as they are the most profitable clients.

Creating an ideal client profile for prospects: Advisors can evaluate prospects based on potential GRPC. Identify prospects with similar characteristics of high GRPC clients.

Once advisors are able to identify potential areas of growth, they can consider the following three approaches to help facilitate GRPC growth.

Attain professional designations. Designations earned by an advisor reflect skill, expertise and, more importantly, imply the advisor’s competence to offer multiple products and solutions.

Top performing insurance advisors, based on GRPC, have earned more professional designations than other advisors. For example, top independent insurance advisors average 1.11 designations compared to 0.48 for those advisors with the lowest GRPC. A majority of low-performing advisors hold no professional designations.

Successful insurance advisors are most likely to have earned Certified Financial Planner, Chartered Financial Consultant, Chartered Life Underwriter, and/or Retirement Management Advisor designations.

Offer more specialized and varied services. Traditional insurance practices are no longer isolated regarding the products they sell or the markets they serve. As these lines continue to blur, successful insurance advisors are expanding their services and products to meet clients’ needs for investment, retirement, insurance and estate planning. These solutions enable advisors to deepen relationships with their clients while maximizing GRPC.
Insurance advisors who are maximizing their GRPC have incorporated these services into their practices at higher rates than their peers.

Do more retirement income planning. There is a clear connection between offering retirement income planning and GRPC. Insurance advisors who offer retirement income planning to all clients typically reap 2.5 times higher average GRPC than those that do not offer to retirement income planning to any clients. Retirement income planning provides an opportunity for advisors to learn more about a client’s total assets and potentially consolidate a greater share of those assets under their discretion.

Today’s financial services landscape is more competitive than ever. Advisors who can position themselves to most efficiently meet client needs will gain success. GRPC is one metric advisors can use to help facilitate that success.

Peter DeWitt is an analyst in distribution research at LIMRA. Peter may be contacted at [email protected] [email protected].

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