InvestmentNews

7 reasons RIAs are adding insurance products

As more commission-free products come to market, RIA firms are beginning to provide insurance solutions to clients

For as long as there has been an RIA industry, RIAs have been allergic to insurance. And for good reason. Insurance historically has been a commission-driven business that doesn’t fit the compensation model or fiduciary ethos of the fee-only RIA. Further, commissions drive up pricing, which can significantly eat into the value of the products. So generally, RIAs haven’t addressed their clients’ insurance needs beyond making the occasional recommendation to purchase term life, exchange an existing high-cost variable annuity for a lower-cost product or look into an income annuity.

Until recently.

Commission-free insurance products, particularly annuities, have come to market rapidly over the past five years. Where there used to be only a few carriers with very limited commission-free product offerings, more than 20 carriers with dozens of products are now available to fee-only advisers. And RIA firms across the country are beginning to provide insurance solutions to their clients for very compelling reasons, both for the benefit of their clients and their firm:

1. Better retirement outcomes for clients. While annuities may be controversial in some circles, they are not among academics. Prominent retirement experts like Wade Pfau, David Blanchett and Michael Finke extol both the financial and psychological benefits of annuities in retirement portfolios. With the advent of commission-free annuities built for RIAs, fee-only advisers now are able to leverage the benefits of annuities to improve outcomes in clients’ financial plans.

2. Fixed-income alternative. With interest rates at historic lows, advisers are challenged to find fixed-income investments that can keep up with inflation and cover advisory fees. Commission-free fixed and fixed index annuities provide yields that can help enhance the fixed-income portion of a client’s portfolio.

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