The Growth Lever Insurance Firms Can’t Afford to Ignore: Consolidating Wealth Management Providers

When it comes to wealth management, when does the adage “less is more” apply? For insurance firms, the answer may be in their use of third-party providers.

A survey from EY* found that insurers typically partner with five to 10 wealth services providers. That suggests that many advisors within insurance firms are entrenched in challenging ecosystems: They’re working with different systems from different vendors that don’t integrate well together, resulting in disjointed, frustrating workflows.

It’s not surprising that these relationships aren’t likely to endure: EY also found that most insurance companies are exploring changing their wealth services providers in the next 12 to 24 months.

The good news is that changing their provider relationships provides insurance firms with an opportunity to reimagine their approach to wealth. And if they do it right, they can achieve two powerful objectives: Catalyzing wealth management growth while strengthening their core insurance business in an increasingly competitive environment.

Transcending Piecemeal Legacy Service Models

Over the years, insurance firms have accommodated a variety of wealth management vendors and solutions because wealth at insurance firms has traditionally been an after-thought — an accessory to the bread-and-butter work of selling and administering insurance policies. That’s why firms didn’t necessarily take a strategic approach to adding wealth management products and services.

Instead, insurance companies often settled for solutions provided by their custodial partners. Unfortunately, major custodians typically offered a mix of technologies that didn’t integrate well together. Solutions for direct business, brokerage, advisory, financial planning and customer relationship management didn’t “talk” to each other, making day-to-day work difficult for the advisors tasked with using them.

A Capital-Light Path for Wealth Management Growth

Given the insurance focus, it’s not hard to see why insurers would be reluctant to invest large sums of capital in wealth management capabilities. Now, they don’t have to. Working with a leading ”wealth as a service” provider is a capital-light endeavor; the right wealth partner can provide a cost-effective infrastructure, technology, expertise and a comprehensive array of product offerings.

This type of collaboration can replace the cumbersome and unwieldy patchwork of wealth services vendors that many firms use today, making life easier for their wealth advisors. With access to a veritable one-stop shop of wealth management capabilities, advisors can spend less time navigating disparate systems and more time focusing on their clients’ needs. Providing a streamlined ecosystem can also improve advisor satisfaction and retention — a key advantage at a time when the market for financial advisors is increasingly competitive and thin.

Meanwhile, insurance firms can free themselves of two major challenges facing financial services institutions today: Keeping up with the breakneck-pace of evolving financial services technology and maintaining compliance with financial services regulations. The right wealth management partner can handle both.

Strengthening the Core Business

As the right provider relationships accelerate growth, insurance firms will also have the opportunity to generate growth in their core businesses. Research shows that when clients take advantage of investment services at a firm, they’re likely to purchase more financial services products overall while staying loyal to that firm.

This trend is due in part to the relationships fostered by wealth management services. Robust wealth management entails more frequent touchpoints. Such increased engagement allows for more trust to develop between clients and insurance firms, encouraging long-standing relationships. So then, when a new insurance or investment need arises, customers with an ongoing relationship with a firm can be more likely to seek out their services.

What’s more, a strong wealth management offering might help insurance firms get on the radar of young clients who wouldn’t ordinarily be familiar with them. One study, for instance, found that 6 in 10 younger Americans were placing too much emphasis on building wealth and not enough on securing that wealth with insurance.** If a younger customer took advantage of an investing opportunity at an insurance firm, the trust they build there could encourage them to seek insurance policies from the same firm as they get older.

How LPL Financial Can Help

With the right partner, insurance firms can grow their wealth management businesses into strong, reliable sources of recurring revenue. In turn, wealth management success can translate into opportunities for growth on the insurance side; as wallet share and client loyalty increase, so does profitability.

LPL Financial is committed to helping insurance firms pursue these milestones as a leading Wealth as a Service provider. We invest $360 million each year in advanced technology solutions for our streamlined, user-friendly platform, enhancing both the advisor and the client experience. We offer a wide array of investment products and comprehensive support in regulatory compliance. And we provide leading expertise built on deep industry knowledge as well as ongoing relationships with some of the biggest names in insurance.

With our help, insurance companies can shed their complex network of wealth management vendors. Firms can streamline their approach to wealth management, positioning themselves for scalable growth and more success. In today’s competitive landscape, insurers shouldn’t settle for anything less.