RIA: We Need Insurance Products, Too

OXON HILL, Md. -- When Scott Beaudin, a certified financial planner, sees a client in need of a risk transfer product, he often doesn’t have a good solution.

That’s because an insurance product is often the best, second-best and third-best options. But as a CFP, those commission products are off-limits to Beaudin’s Pathway Financial Advisors firm, which has offices in Atlanta and South Burlington, Vt.

“RIAs have clients in need of solutions that are created by insurance companies,” Beaudin said. “But the pathway to executing those solutions is difficult for the RIA community. We’re really desperate for the opportunity to better serve our clients by broadening our tool kits.”

Beaudin and Cooper Sinclair of Lincoln Financial Distributors will discuss the RIA need for insurance products during a session today at the LIMRA 2017 Annual Conference. The conference is taking place at the Gaylord National Resort and Convention Center.

Roughly half of Pathway clients could use an annuity or a life insurance product, Beaudin said, usually to offset long-term care or longevity risks in retirement.

Many RIAs will refer clients to an insurance agent where warranted. Others are just in a bind, Beaudin said.

“It’s not ideal,” he said, noting that one advisor handling each client is the best for the relationship.

“What ends up happening, frankly, is we’re just not going there,” he added. “We’re finding other ways to deal with the client case that doesn’t deal with insurance. It basically excludes the insurance company, which is not ideal for the client or the insurance company.”

Ideally, insurance products would follow the route of the no-load mutual funds that were introduced in the 1970s, Beaudin said. That decision “was really intended to broaden the distribution channel,” he explained. Mutual funds grew substantially as a result.

Insurance producers are starting to adapt, with some no-load annuities and fee-based products trickling into the marketplace. That trend is largely traced to the Department of Labor’s controversial fiduciary rule.

“Somehow the insurance industry has got to find out a way to allow us to use their products,” he added. “Essentially, we’re calling for a democratization of the insurance distribution channel to include RIAs, which are generally not included now.”

One possibility is legislation that gives CFPs an exemption from insurance licensing requirements. Overall, the industry is moving in the direction of the advisor fiduciary model, Beaudin noted, which “speaks to the need for insurance companies to act on this.”

“More than ever, we have risks that can be dealt with by using insurance products,” Beaudin concluded.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].

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