inFusion – A Dose of RIA Education from the Marketplace

We are pleased to announce the addition of inFusion – a column added to our newsletter brings you RIA education from the RIA industry. Our first edition focuses on how estate planning solutions are offered in the RIA space and how you can bring an often outsourced function back under your control.

After 3 years of extensive due diligence to find the right partner to solve for estate planning needs specific to RIAs, we are pleased to announce our strategic partnership with Financial Independence Group’s (FIG) RIA Insurance Solutions.

Shortly after launching a handful of teams into independence, we noticed a pattern beginning. “What should we do with our annuity trails?” Teams choosing to be “fee-only” had a tough choice to make. One of our clients walked away from over $400,000 in annual trail revenue per year, as a result! When we surveyed the teams, we launched in 2017, it became obvious that these wealth managers had abandoned the life insurance product sale years ago. The trails were mostly from legacy sales that advisors now saw as a burden during their move to independence. “We haven’t sold annuities or life insurance in 10 years” was a common theme we kept hearing. Being a CFP practitioner for over 20 years, this puzzled me. How were estate planning needs being addressed and why had these advisors given up on estate planning?

Many responses fell into 3 categories. They felt the products had become outrageously expensive, they did not want to be seen as a “product pusher” nor take the time to stay educated on products and many had negative experiences with wholesalers parading through their offices to sponsor the branch manager’s lunch meeting touting performance rather than educating the advisors about how to best use the product to solve for their client’s estate planning needs. Further widening the gap between insurance products and wealth managers was the myth permeating throughout the RIA industry: most think choosing to be fee-only means they have to abandon insurance or outsource it altogether. It’s time to bring that back in-house. The options for fee-only advisors are now cost-effective, a sound estate or income planning solution, and are continuing to evolve even further to meet the demand of RIAs who are taking notice.

Ironically, during this same time, Fusion’s Institutional Consulting division was contacted by a large insurance institution desiring to penetrate the RIA space. The insurance industry has also realized that as advisors continue to move towards independence, their traditional distribution methods (i.e. wholesaler lunches) are not working. There are no longer branch managers sending invites on your behalf, requiring their employees to attend a meeting. Many RIAs, having abandoned insurance years ago, simply do not let the wholesalers in. Most insurance carriers distribute their products to the independent space via an Insurance Marketing Organization (IMO). Working with this particular institutional client, we uncovered exactly why the gap is continuing to grow even wider as the trend towards independence seems to be ever-increasing:  The two worlds were not even speaking the same language.

As part of our SOW, we attended their national conference. Hearing the words commission, product, distribution, and GDC (gag!) brought me back 20 years to when I started as an advisor with AIG.  The Fusion team spent months training this organization on how to speak to wealth managers; providing education and encouraging them to change their vocabulary. The words above do not exist in a fiduciary world. We speak in terms of assets under management, client solutions, and estate planning. Even RIAs who are hybrid and allowed to accept commissions typically don’t ask about compensation, as finding the right product for their client is the main priority. Despite months of education, it was disappointing to hear their sales teams still lead with compensation to the advisor (and still calling it GDC!). There had to be a better way to bridge the insurance/wealth management gap. For those of you who are asking, “What is GDC?” Exactly! You are my people!

In 2018, we decided to create an RFP process to vet out the best estate planning partner for Fusion’s clients and invited five IMOs to participate. Strangely enough, and despite NDAs, we received eight responses. There were only two IMOs using correct RIA terminology in their responses and who led with education rather than top commissions. Despite these disappointing responses, we proceeded with site visits with four IMO’s. The only one who seemed to really understand the RIA space was FIG. They not only understood an RIA’s fiduciary stance, but they respected their independence and had created a model of choice – specific to RIAs. Whether you are fee-only, hybrid or would prefer to have a trusted partner (with no competing interest to your wealth management business) do it for you, the FIG model is one that educates you about your options and provides subject matter expertise that helps you solve for your clients’ needs.

Fusion is not a platform. Our clients are welcome to use whichever IMO they choose. We spent almost three years conducting an institutional-grade due diligence process which included a professional, lengthy RFP, onsite visits with senior management and owners, and case studies of our own clients as they worked with various IMOs. We are happy to share more details on this process if you are considering an exploration of how to bring estate planning back into your practice. Below are some guidelines should you choose to explore this on your own or wish to audit your relationship with your current IMO or General Agent (GA).

IMOs are compensated by the insurance carriers based on the volume of a particular product being sold. Being aligned with one who is large enough to create that volume without having to favor one product over another is a very important factor when selecting your IMO partner. Similar to the RIA space, this had led to mass consolidation amongst smaller IMOs. Despite there still being many IMOs left on the street, there are really only 3-5 large enough to provide ultimate choice without having to sacrifice neutrality.

Seek an IMO that leads with education. Most of the IMOs we researched lead with commissions or access to the latest “sexy” product. A true partner will listen to you, understand your position on how you want to bring estate planning back into your firm, and provide insights to help you achieve this. Your ongoing support should also center around education. If an IMO is focused on a product or commission when dating you, your marriage will probably also be a product-focused partnership with the product changing often as the volume rewards shifts towards other products.

Talk with other RIA references who look like you. Speaking to a financial advisor who is 95% annuity based while you are 99% fee-based is not going to be helpful to your objectives. As a true wealth manager, you are likely going to demand a different level of support from your IMO and access to different resources.

Just because you have met one IMO, does not mean you have met them all. The breadth and depth of an IMO’s platform and the on-going resources they provide should be paramount to your decision. In addition, consider whether the resources they are providing are of value to you.  All teams desire to grow. Making sure the resources they deem to be “growth tools” are in line with your organic growth goals is an important consideration, as well. Many IMOs also offer marketing support through seminars or lead campaigns that may not be aligned to your target market or with your prospecting goals. IMOs aligned with RIAs recognize this and have resources and growth programs specifically designed to support RIAs.

In conclusion, if you are representing yourself to your clients as a holistic wealth manager, you must address their estate planning and income planning needs. While the insurance industry as a whole may still have a long way to go to align with the demands of fiduciary -minded advisors, many offer products that are aligned with a fee-based fiduciary model. Bringing this back in-house instead of referring it to the “insurance guy down the street” can be additive to your revenue, allows you to control the client experience, and ultimately adds to your enterprise value making you more attractive to a buyer. Finding the right IMO to educate you on these products and even provide point of sale support when it makes sense, allows you to do this in an efficient manner. Bottom line: aligning with the right IMO as a strategic part of your team’s offering could lead to an entirely new growth component for your firm.

— Kimberly Papedis, Managing Partner

About Fusion Financial Partners
Fusion Financial Partners (www.fusionfinancialpartners.com) is a premier consulting firm specialized in the area of transformative business consulting for RIAs. Fusion acts as an advocate, educator, tactical guide, and negotiator for advisor teams and national organizations looking to enter or expand in the independent wealth management industry.

About Financial Independence Group

We approach each task with a sense of ownership and apply the utmost standards of excellence to properly support the advisors we serve. With an emphasis on integrity, accountability, results, and value, FIG has represented some of the most comprehensive, competitive, and financially-stable insurance companies in the industry for over 40 years. FIG is currently working in all 50 states, with office locations in North Carolina and Arizona that allow for easy connections with advisors in each regional market. (https://www.figmarketing.com/)

CONTACT: Michaela Moralesmmorales@jconnelly.com

SOURCE Fusion Financial Partners