What To Look For When Partnering With An External Insurance Brokerage

Janeesa Hollingshead, Contributing Editor, Wealth Solutions Report

Advisor Concerns With Insurance Partners, What To Look For In A Partner And How To Create A Holistic Strategy

In many industries, clients’ holistic needs cross partitions that are set by tradition or regulatory authorities, creating an advantage for service providers who address the full range of client needs in a way that erases the friction caused by the partitions. This is true in wealth management, where holistic planning may include tax services, estate planning and insurance.

We previously covered the ongoing convergence of insurance and wealth management. Today we continue our exploration of this convergence with Chad Druvenga, CEO and President of CBS Brokerage, a Minnesota-based insurance brokerage that provides services including advanced planning for businesses, estates and planned giving, as well as life and disability insurance, annuities and long-term care coverage.

We asked Druvenga about advisors’ concerns when working with insurance partners and what RIAs should expect from a partner.

WSR: Why do advisors shy away from working with external insurance partners and what can be done to address their concerns?

Chad Druvenga, CEO & President, CBS Brokerage

Druvenga: We see two primary reasons why RIAs shy away from insurance: a belief that insurance products are misaligned with fiduciary responsibilities and a lack of product-specific expertise to properly design and execute the right strategy for the end client.

Historically, some RIAs overlooked insurance primarily because of how insurance products are distributed and marketed. An advisor selling insurance is an agent of the issuing carrier, which some advisors feel is in conflict with their fiduciary obligation to the client.

Working with an RIA-focused insurance partner benefits clients and the firm. Insurance is part of helping someone manage and protect their wealth. Clients expect financial advisors to be resources across their entire financial lives, and clients want a holistic approach that includes insurance, tax, estate and trust services. 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.

Failure to include insurance services risks losing AUM wallet share to registered insurance providers. An insurance practice can also be highly profitable. A well-structured fiduciary risk management platform can enhance client outcomes, enhance the client experience and drive organic growth.

WSR: What should an RIA look for and get out of their relationship with an external insurance brokerage partner?

Druvenga: An RIA should seek an insurance partner who will sit beside them at the table and understand the firm. The partner should have experience in delivering insurance under a fiduciary standard. The RIA should expect a client-focused process – instead of one driven by product sales – and expect a partner who maintains transparency regarding compensation. The RIA should expect a partner to make product recommendations under a fiduciary lens and deliver a fiduciary underwriting process.

The insurance partner must be agile enough to meet the RIA where it wants to be. RIA insurance services can range from providing outsourced insurance services (i.e., retail support) to helping an existing insurance department inside the RIA (i.e., wholesale support). Regardless, the RIA-focused insurance partner will effectively streamline the insurance process and identify client opportunities and risks through client segmentation.

The insurance partner must have advanced planning expertise in wealth transfer and taxation. The ideal RIA partner will have an unbiased advanced markets attorney on staff to provide bench strength and expertise in modeling complex transactions that demonstrate how insurance will enhance a plan.

WSR: How do insurance partners engage collaboratively with enterprise leaders and advisors to ensure a holistic strategy?

Druvenga: The insurance partner needs to understand or assist the RIA in building out an insurance platform that provides the advisor and client experience they want for their firm. It must be a scalable, repeatable and profitable process that complements the firm’s investment and customer service philosophies.

The insurance partner must provide high-level, consistent training to the advisors and advisory teams based on each individual’s comfort and acumen. Additionally, the insurance partner must provide bench strength and inorganic talent to provide the advisor and RIA the best possible solution or outcome for their client’s situation.

WSR: How do these partnerships safeguard both advisors and clients from potential pitfalls?

Druvenga: Insurance firms that get the RIA space will recommend specific product and concept guard rails to match the firm’s compliance philosophies. An RIA-focused insurance partner can recommend an appropriate compliance framework to protect clients, advisors and the firm.

Janeesa Hollingshead, Contributing Editor at Wealth Solutions Report, can be reached at editor@wealthsolutionsreport.com.

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