Insurance Matters: Critical Considerations for Breakaway Advisors


In my commentary last month, I talked about the “Insurance Gap” and how many advisors are missing a significant opportunity in their practice by not including insurance as an integral part of their client’s financial plan.

This month, I’ll take a look at the breakaway advisor who is in the best possible positions to incorporate insurance into their firm with a proactive and well planned approach from the onset.

As the breakaway movement continues to gain momentum with wirehouse advisors moving into the independent space, the product and service solutions available are becoming more diverse and sophisticated. Compliance, marketing, and technology are well established and are on the top of most advisors’ checklist. However, insurance is still often viewed as an afterthought for many breakaways who often take a figure it out as I go approach. Unfortunately, these temporary ‘band aid’ type solutions seldom serve the firm or client’s best interest in the long run. As an example, one of our client’s solutions when initially launching their firm was to handle insurance internally until they figured out something better. Fast forward five years, and one of their two assistants was spending 60% of her time on insurance related issues, while insurance only accounted for 3% of their revenue. This scenario is not uncommon.

Furthermore, many wirehouse advisors are used to having internal departments to handle their clients’ insurance needs. Once moving into the independent model, the value of duplicating this service is often missed. Advisors who attempt to handle insurance internally, without the proper infrastructure, find themselves buried under a pile of paperwork and illustrations. The right insurance solution can save advisors time and money.

So, where and how does one begin planning to incorporate insurance in their new firm? Being aware and educated of the options available is a good first step in the process. I recommend one of two options, on the surface they may seem similar but they have distinct differences:


Insurance Experts or consultants work closely with your firm on all insurance matters, not just new policies. Consider them an “insourced” insurance department for your firm. They will review existing policies, provide ongoing service for all policies and oversee the new business process including preparing presentations, applications and the entire underwriting process. The expert may be brought in for client meetings to present analysis and recommendations that the advisor has reviewed and agreed to in advance.

This relationship has the benefits of control, oversight and having your clients interact with a professional whose primary goal is not to make a sale or drive commissions. It is similar to bringing in a trust and estates attorney or a CPA. They are experts who provide consultation for your clients in the areas of insurance. Meanwhile, the relationship adds no work to you or your team and assumes all the back office and servicing requirements for your client’s insurance policies. If you are licensed and wish to receive commission, a revenue share can be arranged.


Brokerage General Agency, generally referred as a BGA, can be an excellent solution for licensed advisors who simply need access to insurance information from carriers and underwriting support. Advisors working with a BGA will get 100% of the commission and overrides, but will be responsible for all interactions with the clients and servicing all policies. BGA’s provide varying levels of analyses and back office support including; complete analysis preparation, existing policy inquiries and analysis, recommendations, medical exam scheduling and underwriting. Greater service and back office support is generally offset by lower override payouts. For advisors who can handle the bulk of the insurance internally, a BGA with limited servicing and higher payouts might be a better fit.

When evaluating BGA’s you want to understand their support levels for underwriting, case management and how frequently they update you on case status. Compensation models will vary depending on levels of production and service and generally all comp models are negotiable.


The matrix below will help you decide the likely best solutions for your firm.



To help you get started in properly integrating insurance into your new firm, here are 5 basic steps to consider:


  1. Determine the appropriate structure for your firm; working with an expert or BGA.
  2. Assess the various partners to determine who best shares similar insurance philosophies to you, your firm, and your clients.
  3. Develop a customized service and analysis process with the chosen partner that meets your firm’s need.
  4. Announce the new service to your clients in segmented groups of 10-20 (This allows you to assess the relationship overtime.)
  5. Incorporate insurance reviews as a standard operating procedure in all client review and prospect meetings.


As you set out to launch your new firm, make sure that you’ve considered insurance as part of your checklist. Advisors who research and plan for insurance as a key component to their practice can create a significant advantage in both differentiating their firm and better serving their clients.



Kellan Finley is Managing Director for Insurance Decisions, providing insurance resources for Registered Investment and Independent Advisors.


Discuss this Article 2

on Aug 19, 2014


I appreciate this article, but find the following under the "Insurance Expert" to be inaccurate unless you are talking about a "fee only" insurance expert, which I do not think you are since at the end of the paragraph you referrence commission revenue sharing:

"This relationship has the benefits of control, oversight and having your clients interact with a professional whose primary goal is not to make a sale or drive commissions."

While I would not say the "primary goal" of an "Insurance Expert" is to make a sale or commissions, it is how they make a living, so the reality is it certainly is the highly likely outcome of that expert doing a full and exhaustive needs analysis and policy review of most individuals existing risk management pictures. I just would not want an advisor to be surprised that the "Insuarnce Expert" that they bring to the table with their clieint will very likely have recommendations for the client to purchase new insurance and apply existing liquid resources and ongoing cash flow toward coverring/meeting those insurance needs, which may be a shock to an advisor who has not had much experience with insurance and the fact that the $ needed to meet the insurance premiums might need to move out of current "market investments" in order to fund the policies. If the advisor is not insurance licensed and cannot enter into a revenue sharing agreement, then they will have a net loss of revenue in their investment practice.

I am not saying this in any way to discourage the advisor from seeking a relatiionship with an Insurance Expert, but just to make sure they are not entering into that relationship unprepared or ignorant of what that likely entails.

on Aug 22, 2014

Thank you for your comments; unfortunately, the experience you describe is all too common, so I agree it is important to understand the difference between an insurance expert, or consultant, and an insurance agent. An expert works to inform and support and the advisor. They should be making recommendations that are best for the client, not for themselves. “Review” should obviously not equal “Replace.” In fact, in our own experience, 60% of the policies we review do not result in a replacement or new sale. Many reviews result in no action, or we can often make internal changes to improve a policy if needed. The purpose of an expert, over an insurance agent, is one of education and advice for advisors. While I admit these types of consulting firms are rare, they do exist.

Further, by working to “insource” the expertise of an insurance expert, advisors can vet recommendations in advance, and work through the costs and the structure of new insurances prior to presenting them to clients. Insurance experts who educate and work directly with advisors eliminate the element of surprise that you refer to. Historically, “surprises” arise when advisors outsource insurance to agents, and they no longer control the process, and do not review recommendations in advance.

When we work with advisors, if new insurance is needed, we determine the appropriate type, amount of insurance and agree to a budget that works within the client’s financial plan. I would recommend this process to any advisor looking to successfully incorporate an insurance relationship into their practice.

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