Even though I consider myself a life insurance purist, I must admit I am an avid reader of the investment advisory press. Over the years, I have been overwhelmed by the stories of immense change in the wealth management industry. More recently, the wealth management sector has experienced some seismic events:
» Not one but two major financial crises.
» New regulation.
» Technology companies entering the business in the form of robo advisors.
» An aging advisor force and business succession issues.
» A major shift from commission compensation to a fee-only world.
Wealth managers are experiencing an unprecedented pace and scope of change, which is accelerating rapidly.
It seems that the life insurance business now is poised for a similar period of disruption, growth and evolution. The question is not if change will take place, but when and how it will occur. We are seeing the early signs of this revolution across many facets of our business:
» Electronic applications.
» Exam-free underwriting.
» Engagement with clients via social media.
» Programs of healthy engagement tied to insurance policies.
» An aging producer force.
» The impact of lower interest rates on insurance companies.
As an insurance producer, I can feel the impact of these changes and many more like them. These changes are similar to a snowball rolling down a hill while picking up size, speed and momentum. We are just getting started.
So the question is, what can we learn from the wealth management business’s recent journey? I argue there are two major strategies wealth managers have implemented to help cope with these shifting circumstances: Create an institutionalized team approach and embrace technology.
Proactive producers should use the playbook pages of teams and technology to turn defense into offense in their business. Using this playbook will turn potential threats into opportunity. Let’s look at each of these topics individually.
 Create an Institutionalized Team Approach
Sustainable wealth management practices have been able to differentiate themselves by institutionalizing their relationships. Instead of seeking to draw a client or referral source to a practice because of an individual, the goal is for a client to fall in love with the practice’s process and team.
We have seen this approach in action with numerous investment advisor partners of ours. The lead advisor, who has remained by the client’s side for years, is able to transition that relationship to the junior advisor seamlessly. The planning, the discovery and the institutional knowledge about each client is not lost, but instead transferred to the next generation within the organization.
Successful investment advisory practices are now teams of specialists brought together for the common goal of creating and implementing a client solution. This strategy gives clients great comfort and builds institutional value for the firm.
In fact, this concept of a team and a succession plan for clients may no longer be a best practice for registered investment advisors — it might become a requirement. In June 2016, the Securities and Exchange Commission proposed a rule that would require RIA firms to have a written plan for succession in the event of a principal’s retirement or death. It is obvious the SEC views succession planning as a vital component of protecting clients.
Why should your business be any different? What would it mean if this requirement were to come to your business? How have you planned for succession in your practice?
 Embrace Technology
Technology can be viewed in two ways — as something to be feared or as something that can help make us more effective and efficient. Generally, the wealth management business is embracing new technologies. Individual firms that embrace innovation to supplement their core skills and value proposition are thriving. Advisors who are not embracing technology are being marginalized and replaced.
As an example, the process to open and fund an account once required an in-person meeting, five unique sets of paper forms and two weeks of processing time. Today this can be done online in five minutes or less. Clients can use their custodian’s website to complete all necessary self-service actions and get real-time account updates.
In contrast, our clients find the process of procuring life insurance crazy. In a one-click world, the amount of paper and time that it takes to secure a policy doesn’t make sense. Imagine the impact technology giants such as Amazon and Google will have when they focus their attention on our industry.
If you think this is unfathomable, stop kidding yourself. Recently, you might have caught a glimpse of headlines reading “Will Google and Amazon Offer One-Click Life Insurance?” and “What If Google or Amazon Sold Insurance?” How can anyone expect that tech companies like these won’t have a substantial impact on how consumers purchase our products? The results for those of us who sell life insurance would be equally dramatic.
How have you embraced the newest life insurance technology available today? What percentage of your policies are completed using electronic applications and electronic delivery?
No More Lone Wolves
These developments in the wealth management space were at one time unthinkable to “stockbrokers.” Over the past 20 years, we have seen an industry of brokers shift into “wealth managers.” What I am saying may seem unthinkable today in our business of independent, eat-what-you-kill, lone-wolf “producers.” Nevertheless, change is coming whether we like it or not.
Fully embracing these ideas can happen only when a firm has size and scale. Teams take time to build. Team members need career paths and opportunities to grow. Training relationship managers takes time and experience. Embracing new technologies takes specialists and resources. A firm needs bench strength. All of the moving pieces need to be managed and nurtured, but the results are well worth the effort.
There are two ways to accomplish the goal of becoming an institutionalized, tech-savvy practice. The first is to build it, which takes time, resources and patience. For most producers, this is not something they have the interest or aptitude for, and it would take attention away from their business development activities.
The alternative is to join it. Wealth management firms are building platforms and practices designed to endure through and leverage these changes. Those lone-wolf producers who haven’t been able to institutionalize their connection with clients can partner with those firms who have.
Naysayers will tell you that the wealth management business is a completely different animal with an important advantage — recurring revenue. This is true. Nevertheless, the life insurance business does have recurring revenue. It just takes a different form. Referrals from clients and referral sources, as well as policy updates and term conversions, all exist within your current book of business. This playbook will help ensure that recurring revenue will end up in your pocket rather than in someone else’s.
The producer who is able to focus on institutionalizing their practice — or partner with a practice that has institutionalized — will survive and thrive in this new world. Those who choose not to do so will take on water and ultimately sink. Our industry must and will adapt. The unprepared producer will experience declining income, declining firm value and a declining number of prospects. Producers will have two simple choices over the next five to 10 years — adapt or die.
Tyler Horning is principal with TDC Life, Maumee, Ohio. Tyler may be contacted at [email protected]