Benefits Of Insurance And Wealth Management Converging

THL Managing Director Explains Why Wealth Planning And Insurance Are Converging, How Clients And Professionals Benefit, And His Portfolio Companies’ Experiences

The concept of a single venue to provide all a consumer’s needs is older than the stone ruins of Athens’ Agora. Vendors across time have always sought to work with other vendors or sell a broader range of products to serve the holistic needs of a consumer.

In wealth management and insurance, as elsewhere, the needs of the client do not stop at the boundaries of traditional offerings. Technology, innovation and demand are driving change in wealth management and insurance so that agents, advisors and other professionals have more options to partner with another professional or gain the capability themselves to serve both the holistic wealth planning and insurance needs of clients.

To learn more about the convergence of insurance and wealth management, we spoke with Edward Shahnasarian, Managing Director at THL Partners. A leader in the firm’s Financial Technology & Services vertical, which has deployed $10.3 billion of fund and co-investment capital and partnered with 32 companies, Shahnasarian sits on the boards of AmeriLife Group, Carpe Data, Hightower Advisors and Hexure.

We asked Shahnasarian about the drivers of the convergence, how advisors, agents and clients benefit and the experiences of his portfolio companies.

WSR: What drivers are moving insurance and holistic wealth planning to converge? Do you see these as long-term trends?

Shahnasarian: Clients’ desire to transact with a single counterparty that they know and trust is an important driver in this convergence, enabling each client to transact with the advisor with which they feel most comfortable and the advisor to offer more products to the same individual.

Product innovation is also contributing to this convergence. The annuity has historically been a commissionable product, and in the minds of many RIAs, synonymous with a four letter word. Fee-based annuities are a recent innovation, gaining momentum and market share as the product opens the aperture of annuities to a distribution market that historically shunned the wealth protection product.

Lastly, consolidation that drives scale factors into the convergence. As both industries rapidly consolidate, advisors, agents, brokers, wealth managers and other professionals find themselves under larger corporate umbrellas that offer more product capabilities and further enable execution of insurance and wealth management cross-sells.

And of course, technology is a factor…

WSR: How is technological development supporting this convergence?

Shahnasarian: Technology is enabling advisors and agents to increase the scope of their services and become a consumer’s comprehensive advisor for all things financial. With the help of these emerging tools, insurance agents have begun to dip their toe into wealth management, leveraging services from providers like a turnkey asset manager (TAMP) to offer curated investment portfolios to their traditional life insurance or annuity clients.

The same is true in the wealth space – with the help of providers like tech-enabled insurance brokers, wealth advisors can now offer complex life and annuity products to clients for use as a general risk mitigation tool or for more complex use cases like tax or estate planning.

In the past, advisors were typically pigeonholed into a single “sleeve” of wealth or insurance. Most commonly, you would see advisors who promoted their ability to pick stocks and manage your portfolio for you. Another advisor would focus on trust services and a different advisor would advise on the right life insurance or annuity product. This not only created a pain point for the consumer by having to manage multiple parties, it also limited an agent’s or advisor’s ability to plan comprehensively across the client’s entire financial picture.

The modern advisor is more holistic and strategic, serving client needs across multiple facets of insurance and wealth – which has been enabled by technological advances.

WSR: Who benefits from this convergence and in what ways? How do clients benefit? How do advisors and insurance agents benefit?

Shahnasarian: Convergence is a win-win situation for the client and agent/financial advisor.

The client wins because they get an expanded scope of services from their most trusted counterparty. Life insurance is often called a “sold” product as opposed to “bought.” Being able to work with someone the client already knows and trusts, as opposed to figuring this out in isolation, with new advisors at the table, increases the propensity to buy.

The agent wins as they are now able to cross-sell multiple products to the same client, expanding the total economic opportunity and increasing the breadth of the relationship with the client. Placing a client in a long-dated security or vehicle like a life insurance policy or trust inherently increases the duration of the relationship and client retention.

WSR: In your experience with THL’s portfolio companies, how have you seen or been involved with concrete steps to move toward this convergence?

Shahnasarian: We have two portfolio companies that have lived this convergence, each coming at it from alternative sides.

Hightower is a national RIA managing approximately $150 billion of assets under management. Hightower primarily serves high net worth (HNW) and ultra-high net worth (UHNW) clientele who often have complex, multi-generational estate planning needs. Our clients demanded high-touch, bespoke solutions, but too few of our advisors had trusted places to refer them.

Hightower first went out and acquired a specialty life insurance advisor, Wellspring, that served families with an average net worth of $50 million. Wellspring immediately became the UHNW life insurance distribution solution for Hightower. Hightower also organically developed a corporate family office solution that can also advise on complex estate and tax planning needs.

AmeriLife partners with 200,000 independent agents to distribute life, health and annuity products nationally. Our agents are trusted advisors to clients, but when a client would ask if they could manage their personal wealth, the agent would have to decline due to lack of credentialization and capabilities.

We recognized this missed cross-sell opportunity and acquired a TAMP to make it possible. The TAMP assists our agents with getting credentialed and manages the money for the client, which solves the capabilities challenge and still allows our agent to own the client relationship.

James Miller, Contributing Editor & Research Analyst at Wealth Solutions Report, can be reached at ContributingEd@wealthsolutionsreport.com.