COMMISSION-FREE INSURANCE JOIN THE REVELATION

Financial Planning - - FRONT PAGE -

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.

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