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Key Strategies for P&C Companies to Win in Wealth Management | Insurance blog




Customers’ expectations shift towards a preference for holistic financial guidance. Today’s customers are looking for advice that is tailored to their specific needs. They will actively switch to companies that can provide both personal support and experiences that are tailored to their preferences.

In our previous post, we discussed the four main reasons why we believe that non-life insurance companies and agents should enter the markets for financial advice and asset management in order to move forward in the midst of compression disorders. Providing the right level of interaction and technology is part of offering increasingly personal experiences that enable carriers to win in the asset management area.

Pest owners and agents are well positioned to provide holistic financial advice as they already have ongoing relationships with their customers and have insight into how they live. Their business is also already linked to the financial industry: insurance is, of course, part of customers’ overall financial resilience and well-being.

In this post, we will turn our focus to what is required for P&C companies to win in the advisory and asset management market.

We will begin by examining the strategic decisions that carriers must make when entering the advisory and asset management markets. We will then provide an overview of the capabilities required based on the decisions. Finally, we will provide insight into the potential value at stake.

Choosing where to play and how to separate

There are several paths that P&C companies can take to enter the market for financial advice and asset management. For this post, we have identified four key market entry points:

1. Customer access: Arranging sales of leads between agents or sales of leads to financial advisory and asset management companies.

2. Advisory services: Provide proprietary advice or exclusive access to existing sources of advice through a partner organization.

3. Product offers: Offer your own products or access to a marketplace with products that give customers options to choose from.

4. Platform innovation: Build asset management and counseling into a platform that facilitates access to counseling services and products or integrated financial health information.

To see success, carriers must optimize and take advantage of specific areas of their business to differentiate themselves as they enter their chosen market entry point. Carriers must choose their market entry points and, within that entry point, choose an imperative based on their belief in the market. Below is a starting point for the imperatives – or what a carrier would need to believe to be true – to succeed in a given market entry.

Market entry 1: Customer access

  • The carrier’s distribution partner can and is willing to monetize the advice and asset management share of the wallet for its existing customer base by selling that portion of the unused customer portfolio as a lead to other companies.
  • The carrier has the agency to effectively connect distribution partners and the ability to facilitate a leading marketplace.
  • The carrier has the influence to create partnerships with consulting and wealth management companies as potential recipients for the lead that can best meet customers’ needs.

Market entry point 2: Advisory services

  • The carrier has unique and defensible data or knowledge of its customers that enables more tailored advice than competitors, or
  • The carrier can create its own offer with an existing consulting provider, or
  • The carriers’ distribution partners are willing to provide or cooperate with someone who can provide the advice.

Market entry point 3 – Product offers

  • The carrier must create products that are on par with or better than current market offers at the same or lower cost, or
  • The carrier may access a marketplace with products – at the same or lower cost as competitors – in the asset management area offering the same product line, or
  • The carriers’ distribution partners are willing to sell or collaborate with someone who can sell the product.

Market entry 4 – Platform innovation

  • The carrier has the technical ability to create a highly functional proprietary platform that can surpass current market offerings, or
  • The carrier can work with a technical supplier who can build and maintain a competitive platform offering.

With these considerations in mind, there are several different go-to-market configurations with which carriers can approach each entry point. For example, there may be a go-to-market configuration that requires partnerships across consulting, product, and platform. Alternatively, there may be a go-to-market configuration that simply results in revenue generation for potential customers and does not consider expansion into consulting, product or platform. Keep in mind that different configurations have different risks, investments and rewards.

Additional options for exclusive agents

In addition to the starting points discussed above, exclusive agent carriers have additional options to take advantage of the asset management and advisory market given their unique relationship with their agents. As with the previously discussed starting points, each option has its own unique set of risks and benefits that carriers must consider. These possibilities include:

  • Licensing of current assets for asset management and advisory services.
  • Take advantage of current or experienced financial advisors on a commission-divided basis.
  • Directly hire current or experienced financial advisors as specialists within the organization.

Although the configurations are potentially infinite, there is an important set of features required over configurations that deserve discussion here

Capabilities required over entry point configurations

Although non-life insurance companies are used to adapting their business and business models to a complex, highly regulated business, additional capacity is required to operate in financial advice and asset management. These features may need to be built – or provided with or through a partner.

Let’s start with what it will take for carriers to enable advisory services. In the underserved market described in our first post, a hybrid advisory function – which includes both automated digital interactions and human-to-human interaction – is table-top. Customers expect ease and cost savings in connection with automation but also need human contact points to handle complex situations when they arise.

As these hybrid models are developed, companies that do the right thing will be able to dynamically switch between digital and human counseling channels to optimize the customer experience at the lowest cost to serve.

Carriers must also ensure that agents either have or have access to individuals with the correct designations and licenses in order to provide financial advice. Eligibility as a Certified Financial Planner (CFP) or Series 65 and 66 are mandatory to offer services in this space.

Let’s then look at offering new or improved products. Carriers wishing to enter into asset management must have access to market-leading products, which is usually possible with open source architecture. In many ways, the financial product space is mature and there is already a diverse selection of proven products, so the natural way for most operators is to give customers access to a marketplace of products rather than building their own product. Carriers must be extremely confident in their ability to create a desirable own product to justify the investment required to create an offer that can compete.

Platform development has similar “build versus buy” considerations. Carriers will either need to develop or collaborate with companies that provide the best quality portfolio management platforms. They need to carefully consider whether they have the resources to develop platforms that compete with what currently exists in the financial technology market when it comes to customer experience.

In addition to these entry-point considerations, carriers must also hire or partner with a registered investment adviser (RIA) and hire or partner with a full-service broker-dealer (BD). Another important factor is the strength of a transport company’s compliance function given the high level of regulation in the market for financial advice and asset management.

To assess the value at stake

There are four primary – potentially overlapping – value levies associated with the opportunity in the market for advice and asset management. These are:

  1. Revenue from lead activity
  2. Commission income
  3. Advice fees
  4. Assets under management fees

Although each lever is important, we believe that assets under management fees are the largest lever with the greatest potential.

In our first post in this series, we discussed the underserved marketwhich includes the $ 15 trillion in assets associated with households with less than $ 1 million in investor assets.

For the sake of conservatism, let’s assume that the real underserved market is those with less than $ 500,000 in investable assets that, according to a report by John Hancock, accounts for $ 7.3 trillion in total wealth. If a P&C operator could take only one tenth of one percent of that market, with 30 basis points per annum in margin, it would represent $ 20-30 million in incremental annual fee-based profits.

Because these revenues are fee-based, it also provides the added benefit of diversifying an operator’s revenue streams while strengthening customer relationships and driving customer balance improvements. To put this possibility into perspective, at a total cost of 95%, a carrier would need to add $ 500 million in property / accident premiums to generate a similar marginal contribution.

In addition, we see increased opportunities for growth for carriers that combine assets under management fees with any or all of the other three levers

In summary

Through this series of posts, our intention was to illuminate the path for P&C companies that want to diversify their revenue streams and take a larger share of the wallet by entering the market for financial advice and asset management. It is a business area that we believe has enormous potential for insurance companies to differentiate and move forward.

We hope this series has inspired the next step – or given you some food for thought as you look at your long-term strategy – and looks forward to talking to you about how a break-in in this market can impact your own business. Find Scott aand Bob and keep an eye out for our next series that will cover our perspective on built-in insurance.


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Disclaimer: This content is provided for general information purposes only and is not intended to be used in consultation with our professional advisors.


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