{"id":11818,"date":"2022-10-26T08:54:00","date_gmt":"2022-10-26T13:54:00","guid":{"rendered":"https:\/\/www.figmarketing.com\/blog\/?p=11818"},"modified":"2024-02-22T11:28:48","modified_gmt":"2024-02-22T16:28:48","slug":"ria-insurance-offering-insurance-products-as-a-registered-investment-adviser","status":"publish","type":"post","link":"https:\/\/www.figmarketing.com\/blog\/ria-insurance-offering-insurance-products-as-a-registered-investment-adviser\/","title":{"rendered":"RIA Insurance: Offering Insurance Products as a Registered Investment Adviser"},"content":{"rendered":"\n

Updated February 22, 2024, at 3:19 PM<\/em><\/p>\n\n\n\n

RIA insurance offerings have grown in recent years as more and more financial professionals move toward the RIA business model.<\/p>\n\n\n\n

It\u2019s only natural, too. The progression towards firm independence, customization, and the ability to focus on client-centric solutions attracts many financial professionals.<\/p>\n\n\n\n

As the RIA space continues to grow and consolidate, there\u2019s been a shift toward RIAs offering insurance as the industry evolves.<\/p>\n\n\n\n\n\n\n\n

Clients expect more for the fees they pay. RIA insurance offerings help deliver a comprehensive financial plan that can add firm value and give clients more for the advisory fees they pay. Insurance is the only product that offers lifetime retirement income, death benefit guarantees, tax deferral in the accumulation phase, and potential for tax-free wealth transfer.<\/p>\n\n\n\n

Implementing RIA Insurance Offerings & Solutions<\/strong><\/h2>\n\n\n\n
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For RIAs, implementing the insurance portion of a client\u2019s financial plan can be tricky. Maintaining fiduciary standards, licensing, product research and availability, and technology integration tends to make it more complicated to apply insurance solutions.<\/p>\n\n\n\n

At the same time, options for clients have grown, with online financial management becoming more mainstream. If technology seems convenient and a retail client doesn\u2019t find enough value in the fees they pay to an investment adviser representative (IAR), there\u2019s a higher chance they\u2019ll go the way of self-management.<\/p>\n\n\n\n

The pressure to evolve is mounting, and fee-based and fee-only advisers are working to find new ways to build and diversify their practice while deepening client relationships.<\/p>\n\n\n\n

What Does it Mean to be a Fiduciary and Offer Insurance?<\/strong><\/h3>\n\n\n\n

IARs are well aware of the fiduciary responsibilities set forth by the Securities and Exchange Commission (SEC). First and foremost, as a fiduciary, you owe a higher commitment to your clients. You know to act in a client\u2019s best interest and abstain from any activity that could conflict with their interests. Whether it\u2019s investment planning, financial planning, or insurance recommendations, you as the IAR must practice this level of service across all areas of advice.<\/p>\n\n\n\n

Accordingly, due diligence requires document research and analysis that provides the basis for recommendations. For example: When reviewing life insurance, comparing policy illustrations is only one component of the required due diligence. Someone on your team should check and compare detailed expense pages showing the annual cost of insurance, policy charges, investment choices, and more.<\/p>\n\n\n\n

Likewise, when annuities are a good fit within a plan, it\u2019s essential to look at various product solutions, including low- or no-fee alternatives. A thorough analysis would also compare competitive crediting strategies and income options.<\/p>\n\n\n\n

Related: Life Insurance as Part of a Retirement Plan<\/a><\/h4>\n\n\n\n

Another popular form of insurance that clients are asking for is long-term care (LTC). When creating an LTC plan, a comparative analysis of LTC options would include examining different solutions and how those solutions could affect a plan. Like life insurance, the LTC policy should consider health, age, cash flow, and family dynamics. Research and analysis supporting any recommendation at this level takes expertise and can be time-consuming.<\/p>\n\n\n\n

As a fiduciary, the basis of your analyses and suggestions may include the type of compensation or fee, and you should be comfortable explaining recommendations of commission versus fee-based products.<\/p>\n\n\n\n

What About Form ADV?<\/strong><\/h3>\n\n\n\n

If you\u2019re considering offering insurance as an RIA, you\u2019ll also want to be transparent if you plan to market yourself as a fee-only adviser. This will require disclosures regarding conflicts of interest on your firm\u2019s 2A form and added disclosures for supplemental brochure 2B.<\/p>\n\n\n\n

Your compliance team can help guide you with the word of any conflicts of interest and outside compensation.<\/p>\n\n\n\n

RIA Insurance: Considerations to Get Started<\/strong><\/h2>\n\n\n\n

Maybe you\u2019ve never sold insurance. Perhaps it\u2019s been a while, or you\u2019ve dropped your insurance licenses along the way to becoming an RIA.<\/p>\n\n\n\n

Fear not. There are still ways to offer insurance as an RIA in-house. Here are five practical considerations to know.<\/p>\n\n\n\n

#1: Are You Licensed for Insurance?<\/strong><\/h3>\n\n\n\n

It\u2019s not uncommon for advisers like yourself to drop their FINRA and insurance licenses as you turn towards the RIA channel\u2014if you ever had them in the first place. So, what\u2019s your current situation?<\/p>\n\n\n\n

Some maintained insurance licenses and are dually registered as an IAR and a broker-dealer representative. Known as \u201chybrid advisers,\u201d dually registered IARs can keep their commission-based business. Through their broker-dealer, hybrid advisers may already have access to vetted products (plus administrative support). Is this you or what you envision becoming?<\/p>\n\n\n\n

Benefits of Working With an IMO<\/strong><\/h3>\n\n\n\n

If you\u2019re insurance licensed, you may have access to some carriers. However, most carriers don\u2019t market directly. So if you\u2019re interested in a competitive review of products, you may want to consider partnering with an insurance marketing organization (IMO)<\/strong><\/a>. The advantage of having an IMO in your corner is that it\u2019s easier to run your business efficiently.<\/p>\n\n\n\n

The best IMOs will offer:<\/strong><\/p>\n\n\n\n