COMMISSION-FREE INSURANCE JOIN THE REVELATION
The power of Commission-free insurance + fiduciary control.
Fiduciaries need to be involved in their clients’ insurance. But insurance is a commission-driven industry and that’s hugely problematic for fee-only advisors. Anything that incentivizes selling a particular product rather than growing wealth for the client is simply antithetical to RIAS.
Additionally, commissions can cause significant pricing problems. So, while eliminating commissions from insurance products opens the door for fiduciaries to be involved in their clients’ insurance, it also allows products to be re-priced to deliver better consumer value.
RIA clients want, need and already own insurance. Until now, while RIAS may identify clients’ insurance needs, they have been unable to fulfill them in a fee-only practice.
By leveraging low-cost, Commission-free insurance, RIAS can assure their clients’ insurance needs are fulfilled with products and solutions they recommend. This opens up an enormous set of assets for RIAS to incorporate into their practice, as the insurance industry is more than double the size of the entire RIA industry.
Why is insurance important to RIAS and their clients?
Most RIAS agree that insurance is a critical component in each of their clients’ holistic financial plans. They discuss life insurance, long term care, disability and ask if their clients own annuities, but there’s little they can do with them. DPL works closely with carriers on behalf of RIAS to re-price products to create unique, fee-only options without high commissions or extreme complexity. Carriers recognize the need to modify their products to meet the needs of the fee-only market. The first step is getting rid of commissions and other buried fees in classic insurance products.
For example, the M&E fee for a traditional variable annuity is about 125 basis points per year. That’s before fund expenses, administrative charges and riders that can double the cost. Working with our insurance company partners, we’ve crafted products specifically for fee-only advisors where the fee is as low as 20 basis points a year, many with institutional share class funds.
How do RIAS work with DPL?
DPL serves as an RIA’S “insurance department” with an independent point of view. To get RIAS started with insurance, DPL will compare their clients’ current policies against our suite of lowcost alternatives. Our insurance-licensed and carrier-agnostic consultants analyze RIA clients’ policies to assure that their products are best suited to help them meet their financial goals. We often find that clients can benefit from saving significant amounts in fees alone, while the advisor has the benefit of providing a valuable service and added AUM to their practice.
For example, we worked with an RIA in California to switch out a client’s legacy annuity for a Commission-free alternative, saving the client about $7,500 a year in fees. In addition, DPL’S knowledge of the carrier’s buyback program for legacy policies generated a five-figure check to the client for surrendering.
Academic research shows tangible value in the peace of mind that comes from insurance. After helping RIAS evaluate their clients’ existing products, we expand their insurance advisory service to help RIAS utilize insurance as an investment. Insurance products can provide guaranteed income, longevity protection and protect against sequence of return risk — all benefits that clients need and want.
Can you explain DPL’S membership concept?
Member firms get full access to our lowcost, Commission-free and transparent product suite. Our team of experts provides analysis and insight to help RIAS find better, value-driven solutions to meet their clients’ needs and goals.
Beyond the service and value we provide directly to firms, DPL’S membership forms a buying co-op to drive innovation and negotiate new products on behalf of the fee-only RIA industry.
Are the insurers on board?
Absolutely. We’ve partnered with nine top-tier carriers offering life products — term, variable universal, guaranteed universal — and more than a dozen annuities. We are working to add more to our offering, including carriers in long-term care and disability.